As filed with the Securities and Exchange Commission on March 12, 1999
Registration No. 333-____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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JVWEB, INC.
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(Exact name of Registrant specified in charter)
Delaware 7389 76-0552098
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(State of (Primary Industrial (I.R.S. Employer
Incorporation) Classification) I.D.#)
5444 Westheimer, Suite 2080
Houston, Texas 77056
Tel: (713) 622-9287
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(Address, including zip code of principal place of business
and telephone number, including area code of
Registrant's principal executive offices.)
Greg J. Micek With a copy to:
President Randall W. Heinrich
5444 Westheimer, Suite 2080 Gillis & Slogar, L.L.P.
Houston, Texas 77056 1000 Louisiana, Suite 6905
Tel: (713) 622-9287 Houston, Texas 77002
(Name, address, including zip code (713) 951-9100
and telephone number, including
area code of agent for service.)
Approximate date of commencement date or proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [X].
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Title of each class Proposed maximum
of securities to be Amount to be maximum offering aggregate Amount of
registered registered price per share* offering price* registration fee
<S> <C> <C> <C> <C>
Common Stock 1,092,000 $.45 $491,400.00 $136.61
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</TABLE>
* Estimated solely for purposes of calculating the registration fee based on the
closing price of the Registrant's common stock as reported on the OTC Bulletin
Board on March 10, 1999, or $.45 per share.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 12, 1999
JVWEB INC.
5444 Westheimer, Suite 2080
Houston, Texas 77056
Telephone: (713) 622-9287
1,092,000 Shares of Common Stock
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We are a comparatively new company formed to pursue electronic commerce
opportunities. We are now involved in the provision of certain Internet
services. In the future and as available funds permit, we will consider the
offering of products, services, content and advertising through sites on the
World Wide Web owned either directly or through joint ventures.
This prospectus relates to up to 1,092,000 shares of our Common Stock, par
value $.01 per share. These shares have been issued (or may be issued in the
future pursuant to exercises of certain outstanding options) to security holders
named under the "SELLING STOCKHOLDERS" section. We will not receive any of the
proceeds from the sale of these shares by such stockholders other than amounts
received upon exercise of the options in accordance with their terms.
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Trading Symbol:
NASD OTC Bulletin Board - JVWB
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You should consider carefully the Risk Factors beginning on page 2 of this
Prospectus.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved these securities or determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
The date of this Prospectus is ______________________, 1999.
<PAGE>
RISK FACTORS
The securities covered by this Prospectus involve a high degree of risk.
Accordingly, they should be considered extremely speculative. You should read
the entire Prospectus and carefully consider, among the other factors and
financial data described herein, the following risk factors:
1. Extremely Limited Operating History; Accumulated Deficit. The Company
was incorporated in October 1997. Upon incorporation, the Company continued
preliminary work commenced by the founder of the Company several months earlier.
In view of the length of its operating history, you may have difficulty in
evaluating the Company and its business and prospects. You must consider our
business and prospects in light of the risks, expenses and difficulties
frequently encountered by companies in their early stage of development. This is
particularly true of companies in new and rapidly evolving markets such as
electronic commerce. Such risks include an evolving and unpredictable business
model and the management of possible rapid growth. To address these risks, we
must successfully undertake most of the following activities:
* Continue to develop the strength and quality of our operations
* Maximize the value delivered to our clients
* Enhance our current and future brands
* Develop and increase our customer bases
* Implement and successfully execute our business and marketing
strategy
* Continue to develop and upgrade our technology and transaction-
processing systems
* Respond to competitive developments
* Identify and pursue suitable electronic commerce opportunities
* Identify and enter into binding agreements with suitable joint
venture partners
* Create and constantly improve our Web sites
* Provide superior customer service and order fulfillment
* Attract, retain and motivate qualified personnel.
* Identify and consummate suitable acquisitions
There can be no assurance that we will be successful in undertaking such
activities. Our failure to address successfully our risks could materially and
adversely affect our business, prospects, financial condition and results of
operations. Moreover, the Company has incurred net losses since inception. As of
December 31, 1998, we had an accumulated deficit of $480,102.
2. Fluctuations in Operating Results. We expect that our operating results
will fluctuate in the future due to a number of factors. We do not control many
of these factors. These factors include the following:
* The level of usage of the Internet
* Demand for our products, services and advertising
* Our ability to attract new customers at a steady rate
* The productivity of our fee-for-service division
* Our ability to attract and retain personnel with the necessary
strategic, technical and creative skills required to service
clients effectively
* Our ability to pursue suitable electronic commerce
opportunities, enter into suitable joint ventures and
consummate suitable acquisitions at a steady rate
* The rate at which we add or loss advertisers
* The rate at which we or our competitors introduce new products,
services or Web sites * Pricing changes for Web-based
products, services and advertising
* Technical difficulties affecting our Web sites
* The amount and timing of capital expenditures and other costs
relating to the expansion of our operations
* Costs relating to our marketing programs and acquisitions
* Client budgetary cycles
* Government regulation and legal developments regarding the use of
the Internet
* General economic conditions and economic conditions specific to
the Internet and Web sites.
To respond to changes in our competitive environment, we may occasionally make
certain service, marketing or supply decisions or acquisitions. We may benefit
from these decisions or acquisitions in the long run. However, in the short run,
such decisions or acquisitions could materially and adversely affect our
quarterly results of operations and financial condition. We also expect that
(like other retailers) we may experience seasonality in our businesses in the
future. Due to all of the foregoing factors, in some future quarter our
operating results may fall below the expectations of investors and any
securities analysts who follow the Common Stock. In such event, the trading
price of the Common Stock could be materially adversely affected. Further, we
believe that period-to-period comparisons of our financial results may not be
very meaningful. Accordingly, you should not conclude that such comparisons
indicate future performance.
3. Future Capital Needs; Uncertainty of Additional Financing. We currently
have no constant and continual flow of revenues. Our future liquidity and
capital requirements will depend upon numerous factors, including the success of
our existing and future services and the success of our Web sites. We may need
to raise additional funds through public or private financing, strategic
relationships or other arrangements. There can be no assurance that such
additional funding (if needed), will be available on terms acceptable to us.
Furthermore, debt financing (if available and undertaken) may involve
restrictions limiting our operating flexibility. Moreover, if we issue equity
securities to raise additional funds, the following results will or may occur:
* The percentage ownership of our existing stockholders will be reduced
* Our stockholders may experience additional dilution in net book value
per share
* The new equity securities may have rights, preferences or
privileges senior to those of the holders of our Common Stock.
We can not now predict our additional capital requirements because of the
uncertainty of our actual growth. However, to pursue our business plan as
desired, we believe that our future capital requirements will exceed our current
financial position. We expect to finance our operations for fiscal 1999 through
cash flow from operations, proceeds from the exercise of certain outstanding
warrants and options to purchase shares of Common Stock, and the possible
private placement of our equity securities. We are looking for sources of
additional capital. However, there can be no assurance that we will find such
sources. If adequate funds are not available on acceptable terms, we may be
prevented from pursing future opportunities or responding to competitive
pressures. The failure to purse future opportunities or respond properly to
competitive pressures could materially and adversely affect our business,
results of operations and financial condition.
4. Dependence on the Internet. Our future success substantially depends
upon continued growth in the use of the Internet and the Web. Such growth seems
necessary to support the sale of our products, services and advertising. Rapid
growth in the use of the Internet and the Web is a recent phenomenon. There can
be no assurance that communication or commerce over the Internet will become
more widespread. In addition, if Internet use continues to grow significantly,
there can be no assurance that the Internet infrastructure will remain adequate
for supporting the increased demands placed upon it. The Internet could lose its
viability due to either:
* Delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity; or
* Increased governmental regulation
Changes in or insufficient availability of telecommunications services to
support the Internet also could slow response times and adversely affect usage
of the Web and our Web sites. If Internet use fails to continue to grow, or if
the Internet infrastructure fails to support effectively growth that may occur,
our business, operating results and financial condition could be materially
adversely affected.
5. Risks Associated with Technological Change. The Internet and electronic
markets involve certain characteristics that expose our existing and future Web
sites, technologies, service practices and methodologies to the risk of
obsolescence. These characteristics included the following:
* Rapid changes in technology
* Rapid changes in user and customer requirements
* Frequent new service or product introductions embodying new
technologies
* The emergence of new industry standards and practices
Our performance will partially depend on our ability to license leading
technologies, enhance our existing services, and respond to technological
advances and emerging industry standards and practices on a timely and
cost-effective basis. The development of Web sites entails significant technical
and business risks. There can be no assurance that we will use new technologies
effectively or adapt our Web sites to consumer, vendor, advertising or emerging
industry standards. If we are unable, for technical, legal, financial or other
reasons, to adapt in a timely manner in response to changing market conditions
or customer requirements, our business, results of operations and financial
condition could be materially adversely affected.
6. Reliance on Third Parties. Our operations will depend on a number of
third parties, some of which are specifically discussed herein. We will have
limited control over these third parties. We will probably not have many
long-term agreements with many of them. We do not own a gateway onto the
Internet. Instead, we now and presumably always will rely on a network operating
center to connect our Web sites to the Internet. We also will rely on a variety
of technology that we will license from third parties. Our loss of or inability
to maintain or obtain upgrades to any of these technology licenses could result
in delays. These delays could materially adversely affect our business, results
of operations and financial condition, until equivalent technology could be
identified, licensed or developed and integrated. Furthermore, we will depend on
hardware suppliers for prompt delivery, installation and service of servers and
other equipment used to deliver our products and services. If we are unable to
maintain satisfactory relationships with such third parties on acceptable
commercial terms, or the quality of products and services provided by such third
parties falls below a satisfactory standard, our business, results of operations
and financial condition could be materially adversely affected. In addition, we
will also depend upon Web browsers for access to the products, services and
advertising that we will offer.
7. Reliance on Specific Strategic Relationship. We have developed a
critical strategic relationship with Heitmann S.A.C, a company based in the
United Kingdom, and its parent company Lernout En Hauspie, a company based in
Germany, regarding several business relationships relating to our
fee-for-service division. We have reached informal agreements with these
companies regarding our relationship with them. However, we have not yet entered
into any legally binding agreement with either of them, although legally binding
agreements are currently being negotiated. The loss of our strategic
relationship with either Heitmann S.A.C or Lernout En Hauspie would materially
adversely affected our business, results of operations and financial condition.
8. Recruitment and Retention of Internet Professionals. Our fee-for-service
division is labor intensive. Accordingly, the success of this division partially
depends on our and our subcontractors' abilities to identify, hire, train and
retain consulting professionals who can provide the Internet strategy,
technology, marketing, audience development and creative skills required by
clients. There is currently a shortage of such personnel. This shortage is
likely to continue for the foreseeable future. We and our subcontractors will
have to compete intensely with other companies for qualified personnel. There
can be no assurance that we and our subcontractors will attract, assimilate or
retain other highly qualified technical, marketing and managerial personnel in
the future. The inability to attract and retain the necessary technical,
marketing and managerial personnel could materially and adversely affect our
business, results of operations and financial condition.
9. Dependence on Client Outsourcing. There can be no assurance that
businesses will outsource the design, development and maintenance of their Web
sites to Internet professional services firms. Companies may decide to assign
the design, development and implementation of Web sites to their internal
information technology divisions, which have ready access to both key client
decision makers and the information required to prepare proposals for such
solutions. If independent providers of Internet professional services prove to
be unreliable, ineffective or too expensive, or if software companies develop
tools that are sufficiently user-friendly and cost-effective, enterprises may
choose to design, develop or maintain all or part of their Web sites in-house.
10. Uncertain Acceptance of the Internet as a Medium for Commerce. For our
business plan to succeed, a broad base of consumers, vendors and advertisers
must adopt the Internet as a medium for commerce. We intend to target consumers,
vendors and advertisers who have historically used traditional means of commerce
to conduct business. Most of our customers, vendors and advertisers will have
only limited experience with the Web as a commercial medium and may not find the
Web as an effective medium for transacting business. Moreover, critical issues
concerning the commercial use of the Internet remain unresolved and may affect
the growth of Internet use or the attractiveness of conducting commerce by means
of Web sites. These critical issues include the following:
* Ease of access
* Security
* Reliability
* Cost and quality of service
* Development of the necessary infrastructure (such as a reliable
network backbone)
* Timely development and commercialization of performance
improvements (including high speed modems)
11. Developing Market. The electronic market for products, services and
advertising has only recently begun to develop and is rapidly changing. As is
typical for a new and rapidly evolving market, demand for products, services and
advertising over the Internet is considerably uncertain. There exist few proven
services and products. Since the market for electronic commerce on the Internet
is new and evolving, predictions of the size and future growth (if any) of this
market are difficult. Moreover, no standards have yet been widely accepted for
the measurement of the effectiveness of Web-based advertising. There can be no
assurance that such standards will develop sufficiently to support Web-based
advertising as a significant advertising medium. In addition, there can be no
assurance that advertisers will determine that banner advertising offered on Web
sites is an effective or attractive advertising medium. Moreover, there can be
no assurance that we will effectively transition to any other forms of Web-based
advertising if they develop. Furthermore, certain advertising filter software
programs are available that limit or remove advertising from an Internet user's
desktop. If generally adopted by users, such software may materially and
adversely affect the viability of advertising on the Internet. Our business,
results of operations and financial condition could be materially adversely
affected if any of the following events occur:
* The markets for our electronic commerce fail to develop
* The markets for our electronic commerce develop more slowly than expected
* The markets for our electronic commerce become saturated with
competitors
* Our electronic commerce fails to achieve market acceptance
12. Opportunity Selection. An integral part of our business strategy is the
identification and pursuit of potentially successful electronic commerce
opportunities. There can be no assurance that we will be able to identify
successful electronic commerce opportunities or that we will be able to pursue
these opportunities successfully even if identified. There is no specific
criterion for selecting electronic opportunities. Accordingly, we will have
significant flexibility in selecting such opportunities. Our failure to select
good electronic commerce opportunities could materially and adversely affect our
business, results of operations and financial condition.
13. Uncertain Acceptance of Brands. While we expect to offer the brands of
other persons, we also intend to develop our own brands. We believe that, due to
the growing number of Internet sites and the relatively low barriers to entry,
the importance of brand recognition will increase as more companies engage in
commerce over the Internet. Development and awareness of our brands will depend
largely on our success in establishing and maintaining a position as a leader in
Internet commerce and in providing high quality products and services. There can
be no assurance that we will succeed in this regard. To attract and retain
customers, vendors and advertisers and to promote and maintain our brands in
response to competitive pressures, we may need to increase our marketing and
advertising budgets or otherwise to increase substantially our financial
commitment to creating and maintaining brand loyalty among vendors and
consumers. Our business, results of operations and financial condition could be
materially adversely affected if any of the following events occur:
* We are unable to provide high quality products, services and advertising
* We otherwise fail to promote and maintain our brands
* We are unable to achieve or maintain a leading position in Internet
commerce
* We incur significant expenses in attempting to achieve or maintain
a leading position in Internet commerce or to promote and maintain our
brands
14. Content and Graphic Development. Content and (to a lesser degree)
graphic development relating to our Web sites are key elements to the success of
our brands-under-management division. If these sites fail to have solid content
(which is modified on a continual basis) and appealing graphics, we expect that
consumers, vendors and advertisers will not be attracted to, or will discontinue
to visit and utilize, the sites. We expect that (as a consequence) we will fail
to develop successfully our brands. We have relied and will continue to rely
substantially on content and graphic development efforts of third parties. There
can be no assurance that our current or future third-party providers will
effectively implement these properties, or that their efforts will result in
significant revenue to us. Any failure to develop and maintain high-quality and
successful Web sites could materially and adversely affect our business, results
of operations and financial condition.
15. Internet Commerce Security Risks. A significant barrier to electronic
commerce and communications is the secure transmission of confidential
information over public networks. We will rely on encryption and authentication
technology licensed from third parties to provide the security and
authentication necessary for secure transmission of confidential information.
There can be no assurance that advances in computer capabilities, new
discoveries in the field of cryptography or other events or developments will
not compromise or breach the algorithms we use to protect customer transaction
data. Any such compromise of our security could materially and adversely affect
our business, results of operations and financial condition. A party able to
circumvent our security measures could misappropriate proprietary information or
cause interruptions in our operations. We may need to expend significant capital
and other resources to protect against the threat of such security breaches or
to alleviate problems caused by such breaches. Concerns over the security of
Internet transactions and the privacy of users may also inhibit the growth of
the Internet generally, and the Web in particular, especially as a means of
conducting commercial transactions. To the extent that our activities or the
activities of third party contractors involve the storage and transmission of
proprietary information (such as credit card numbers), security breaches could
expose us to a risk of loss or litigation and possible liability. There can be
no assurance that our security measures will prevent security breaches or that
failure to prevent such security breaches will not materially and adversely
affect our business, results of operations and financial condition.
16. Reliance on Merchandise Vendors and Third Party Manufacturers. We
expect that we will depend entirely upon vendors and third party manufacturers
to supply merchandise for sale through our Web sites. We expect that the
availability of merchandise is and will be unpredictable. We expect that we will
generally have no long-term contracts or arrangements with our vendors and
manufacturers that guarantee the availability of merchandise. There can be no
assurance of the following:
* That our current and future vendors and manufacturers will
continue to sell merchandise to or manufacture merchandise for
us or otherwise provide merchandise for sale through our Web
sites
* That we will be able to establish new vendor or manufacturer
relationships that ensure merchandise will be available.
We will also rely on many of our vendors, manufacturers and joint venture
partners to process and ship merchandise to customers. We will have limited
control over the shipping procedures of our vendors, manufacturers and our joint
venture partners. Shipments by these vendors, manufacturers and joint venture
partners may be subject to delays. We expect that most merchandise we will sell
will carry a warranty supplied either by the manufacturer or the vendor, and we
will not be legally obligated to accept merchandise returns. Nonetheless, we may
voluntarily accept returns from customers. We may or may not receive
reimbursements from our vendors or manufacturers for accepting such returns. Our
business, results of operations and financial condition could be materially
adversely affected by any of the following events:
* We are unable to develop and maintain satisfactory relationships
with vendors and manufacturers on acceptable commercial terms
* We are unable to obtain sufficient quantities of merchandise
* The quality of service provided by our vendors and manufacturers
falls below a satisfactory standard
* Our level of returns exceeds our expectations
17. Risk of System Failure; Single Site. Our success largely depends upon
communications hardware and computer hardware provided by a third party in a
facility located in Arizona. Like all computer systems, this system is
vulnerable to damage from earthquake, fire, floods, power loss,
telecommunications failures, break-ins and similar events. Despite our security
measures, our servers are also vulnerable to computer viruses, physical or
electronic break-ins and similar disruptive problems. The occurrence of any of
these problems could lead to interruptions, delays, loss of data or cessation in
service to users of our services and products. We do not presently have
redundant systems or a formal disaster recovery plan, although we are currently
in the processing of developing these. We do not now and will not for the
foreseeable future maintain business interruption insurance. Any system failure
that interrupts or increases response times of our Web sites could result in
less traffic to such sites. If sustained or repeated, such failure could reduce
the attractiveness to consumers, vendors and advertisers of our products,
services and advertising. In addition, a key element of our strategy is to
generate a high volume of visits to and activity with respect to our Web sites.
An increase in the volume of visits to our Web sites could strain the capacity
of the software or hardware we use. This strain could lead to slower response
time or system failures. Such events could adversely affect sales of products,
services and advertising and the number of impressions received by advertising
and thus our advertising revenues.
18. Protection of Intellectual Property. The development of our brands
depends significantly on the protection of our trademarks and trade names. We
have registered the "JVWeb", "Dad & me", and "familylifestyle" trademarks in the
United States. We also claim common law trade name rights in these and other
names. Nonetheless, there can be no assurance that we will be able to secure
significant protection for these trademarks. Our current and future competitors
or others may adopt product or service names similar to our trademarks, thereby
impeding our ability to build brand identity and possibly leading to customer
confusion. Our inability to protect our trademarks and trade names might
materially and adversely affect our business, results of operations and
financial condition. In addition, in the future third parties may claim certain
aspects of our business infringe their intellectual property rights. While we
are not currently subject to any such claim, any future claim (with or without
merit) could result in one or more of the following:
* Significant litigation costs
* Diversion of resources, including the attention of management
* Our agreement to certain royalty and licensing arrangements
Any of these developments could materially and adversely affect our business,
results of operations and financial condition. In the future, we may also need
to file lawsuits to enforce our intellectual property rights, to protect our
trade secrets, or to determine the validity and scope of the proprietary rights
of others. Such litigation, whether successful or unsuccessful, could result in
substantial costs and diversion of resources. Such costs and diversion could
materially and adversely affect our business, results of operations and
financial condition.
19. Regulatory Concerns. We are not currently subject to direct regulation
by any government agency in the United States, other than regulations applicable
to businesses generally. There are currently few laws or regulations directly
applicable to access to or commerce on the Internet. Due to the increasing
popularity and use of the Internet, a number of laws and regulations may be
adopted with respect to the Internet, covering issues such as user privacy,
pricing and characteristics and quality of products and services. Such
legislation could dampen the growth in use of the Web generally and decrease the
acceptance of the Web as a communications and commercial medium. Such a
development could materially and adversely affect our business, results of
operations and financial condition. In addition, because our products and
services will be available and sold over the Internet in multiple states and
foreign countries and because we expect to sell to numerous consumers resident
in such states and foreign countries, such a jurisdiction may claim that we are
required to qualify to do business as a foreign entity in such jurisdiction. We
are qualified to do business in only two states. Our failure to qualify to do
business as a foreign entity in a jurisdiction where we are required to do so
could subject us to taxes and penalties for the failure to qualify. Any
application of laws or regulations of a jurisdiction in which we are not
currently qualified could materially and adversely affect our business, results
of operations and financial condition.
20. Other Potential Liability. Certain of our services will involve the
development, implementation and maintenance of applications that are critical to
the operations of our clients' businesses. Our failure or inability to meet a
client's expectations in the performance of our services could injure our
business reputation or result in a claim for substantial damages against us,
regardless of our responsibility for such failure. We will attempt to limit
contractually our damages arising from negligent acts, errors, mistakes or
omissions in rendering our services. However, there can be no assurance that any
contractual protections will be enforceable in all instances or would otherwise
protect us from liability for damages. In addition, Internet users will be able
to download certain materials from our Web sites and subsequently distribute the
materials to others. Because of this, claims could be asserted against us (with
or without merit) in the future on a variety of legal theories (including
defamation, negligence and copyright and trademark infringement) depending on
the nature and content of such materials. For example, we could be liable for
any of the following:
* Libel for any defamatory information we provided about a person
* Any losses incurred by a person in reliance on incorrect information we
negligently provided * Copyright and trademark infringement resulting from
information we provided
Moreover, we expect that we may agree with third parties to provide links to
such third parties' Web sites. A claimant might successfully argue that by
providing such links, we are liable for wrongful actions by such third parties
through such Web sites, for such matters as the following:
* Defamation
* Negligence
* Copyright and trademark infringement
* Losses resulting from the products and services sold by the third
party.
We are in the process of procuring general liability insurance. Even if we
procure this insurance, the insurance may not cover all potential claims or may
not adequately indemnify us for all liability to which we are imposed. Any
liability or legal defense expenses not covered by insurance or exceeding our
insurance coverage could materially and adversely affect our business, operating
results and financial condition.
21. Indemnification of Officers and Directors for Securities Liabilities.
Our Bylaws provide that we must indemnify each director, officer, agent and/or
employee to the maximum extent provided for in the General Corporation Law of
Delaware. Further, we may purchase and maintain insurance on behalf of any such
persons whether or not we have the power to indemnify such person against the
liability insured against. Consequently, because of the actions of officers,
directors, agents and employees, we could incur substantial losses and be
prevented from recovering such losses from such persons. Further, the Commission
maintains that indemnification is against the public policy expressed in the
Act, and is therefore unenforceable.
22. Competition. The electronic commerce market (particularly on the
Internet) is new, rapidly evolving and intensely competitive. Most of our
current and potential competitors have longer operating histories, larger
installed customer bases, longer relationships with clients and significantly
greater financial, technical, marketing and public relations resources than we
do, and could decide at any time to increase their resource commitments to our
market. We expect competition to intensify in the future. There can be no
assurance that existing or future competitors will not develop or offer services
that provide significant performance, price, creative or other advantages over
those we offer. Such a development could materially adversely affect on our
business, results of operations and financial condition. In addition, certain
current competitors have established, and certain other current competitors (as
well as future competitors) may in the future establish, cooperative
relationships among themselves or directly with vendors to obtain exclusive or
semi-exclusive sources of merchandise. Accordingly, new competitors or alliances
among competitors and vendors may emerge and rapidly acquire market share.
Increased competition may result in reduced operating margins, loss of market
share and a diminished brand franchise. As a result of their larger size, our
competitors may be able to secure merchandise from vendors on more favorable
terms than we can. Moreover, they may be able to respond more quickly to changes
in customer preferences or to devote greater resources to the development,
promotion and sale of their merchandise than we can. Any of these circumstances
could materially adversely affect our business, results of operations and
financial condition.
23. Management of Potential Growth. We believe that, given the right
business opportunities, we may expand our operations rapidly and significantly.
If rapid growth were to occur, it could place a significant strain on our
management, operational and financial resources. To manage any significant
growth of our operations, we will be required to undertake the following
successfully:
* Expand existing operations (particularly with respect to customer service
and merchandising)
* Improve on a timely basis existing and implement new operational,
financial and inventory systems, procedures and controls, including
improvement of its financial and other internal management systems
* Train, manage and expand our employee base
Further, we will be required to maintain relationships with various merchandise
vendors, freight companies, warehouse operators, other Web sites and services,
Internet service providers and other third parties and to maintain control over
our strategic direction in a rapidly changing environment. If we are unable to
manage growth effectively, our business, results of operations and financial
condition could be materially adversely affected.
24. Potential Acquisitions. As part of our business strategy, we may
acquire complementary companies, products, services or technologies. Any
acquisition would be accompanied by the risks commonly encountered in an
transaction. Such risks include the following;
* Difficulty of assimilating the operations and personnel of the
acquired companies
* Potential disruption of our ongoing business
* Inability of management to maximize our financial and strategic
position through the successful incorporation of acquired
businesses and technologies
* Additional expenses associated with amortization of acquired
intangible assets
* Maintenance of uniform standards, controls, procedures and
policies
* Impairment of relationships with employees, customers, vendors
and advertisers as a result of any integration of new management
personnel
* Potential unknown liabilities associated with acquired businesses
There can be no assurance that we would be successful in overcoming these risks
or any other problems encountered in connection with such acquisitions. Due to
all of the foregoing, any future acquisition may materially and adversely affect
our business, results of operations, financial condition and cash flows.
Although we do not expect to use cash for acquisitions, we may be required to
obtain additional financing if we choose to use cash in the future. There can be
no assurance that such financing will be available on acceptable terms. In
addition, if we issue stock to complete any future acquisitions, existing
stockholders will experience further ownership dilution.
25. Reliance Upon Directors and Officers and Limited Management Resources.
We substantially depend upon the efforts and skills of Greg J. Micek, a director
and the President of the Company. The loss of Mr. Micek's services, or his
inability to devote sufficient attention to our operations, could materially and
adversely affect our operations. We do not maintain key man life insurance on
Mr. Micek. In addition, there can be no assurance that the current level of
management is sufficient to perform all responsibilities necessary or beneficial
for management to perform. Our success in attracting additional qualified
personnel will depend on many factors, including our ability to provide them
with competitive compensation arrangements, equity participation and other
benefits. There is no assurance that we will be successful in attracting highly
qualified individuals in key management positions.
26. Lack of Relevant Experience by Management. We believe that we have
ample experience to manage our fee-for-service division. However, our
brands-under-management division requires management experience of a different
nature. We expect that we will generally have little or no direct experience in
the management or operation of the types of businesses represented by the
products and services we will offer by means of Web sites, either directly or
through joint ventures through our brands-under-management division. In the case
of joint ventures, we expect that our joint venture partners will have a
requisite level of experience. However, there can be no assurance that we will
be familiar enough with the joint venture's proposed business to ascertain this.
Because of our lack of experience, we may be more vulnerable than others to
certain risks. We also may be more vulnerable to errors in judgment that could
have been prevented by more experienced management. As a result, our lack of
previous experience could materially and adversely affect our future operations
and prospects.
27. Control, Cumulative Voting, and Preemptive Rights. Greg J. Micek, a
director and the President of the Company, owns approximately 73.1% of the
outstanding Common Stock (considered on an undiluted basis). Cumulative voting
in the election of Directors is not provided for. Accordingly, the holder or
holders of a majority of the outstanding shares of Common Stock (currently Mr.
Micek) may elect all of our Board of Directors after completion of the offering.
There are no preemptive rights in connection with the Common Stock. Thus, the
percentage ownership of existing stockholders may be diluted if we issue
additional shares in the future.
28. Preferred Stock. Our Certificate of Incorporation authorizes the
issuance of up to 10,000,000 shares of Preferred Stock, par value $.01 per
share. No shares of Preferred Stock were issued as of March 10, 1999. The
authorized Preferred Stock constitutes what is commonly referred to as "blank
check" preferred stock. This type of preferred stock allows the Board of
Directors to divide the Preferred Stock into series, to designate each series,
to fix and determine separately for each series any one or more relative rights
and preferences and to issue shares of any series without further stockholder
approval. Preferred stock authorized in series allows our Board of Directors to
hinder or discourage an attempt to gain control of the Company by a merger,
tender offer at a control premium price, proxy contest or otherwise.
Consequently, the Preferred Stock could entrench our management. The market
price of the Common Stock could be materially and adversely affected by the
existence of the Preferred Stock.
29. Limited Trading Market; Limited Float. The Common Stock trades in the
United States only in the over-the-counter market on the OTC Electronic Bulletin
Board. Public trading of the Common Stock commenced on June 30, 1998. Thus far,
the prices at which the Common Stock has traded have fluctuated fairly widely on
a percentage basis. See "MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS." There can be no assurance as to the prices at which the
Common Stock will trade in the future, although they may continue to fluctuate
significantly. Prices for the Common Stock will be determined in the marketplace
and may be influenced by many factors, including the following:
* The depth and liquidity of the markets for the Common Stock
* Investor perception of us and the industry in which we participate
* General economic and market conditions
In addition to the preceding, only approximately 25.7% of the shares of Common
Stock outstanding are held by persons not affiliated with the Company. This
limited float may decrease the liquidity of the Common Stock from what it would
be in a more active trading market. It could also cause holders of the Common
Stock to retain their shares longer than they may want. The resulting limited
liquidity may also have the effect of depressing the price of the Common Stock.
We believe that the initial limited float will be eased to some extent over time
as, if and when the following events occur:
* Certain warrants to purchase the Common Stock are exercised
* Shares of Common Stock subject to legal or contractual
restrictions become freely tradeable
* Freely tradeable shares are issued in connection with acquisitions
* We undertake additional public offerings of additional shares of
Common Stock
30. Potential Future Sales Pursuant to Rule 144. After taking into
consideration the issuance of certain of the shares being registered,
approximately 9,373,135 shares of Common Stock will be issued and outstanding.
We believe that approximately 6,420,000 of these shares are "restricted
securities" as that term is defined in Rule 144 promulgated under the Act. Rule
144 provides in general that a person (or persons whose shares are aggregated)
who has satisfied a one-year holding period, may sell within any three month
period, an amount which does not exceed the greater of 1% of the then
outstanding shares of Common Stock or the average weekly trading volume during
the four calendar weeks before such sale. Nearly all of the restricted shares
have been outstanding for over one year and thus are eligible for sale under
Rule 144. Rule 144 also permits the sale of shares, under certain circumstances,
without any quantity limitation, by persons who are not affiliates of the
Company and who have beneficially owned the shares for a minimum period of two
years. Hence, the possible sale of these restricted shares may, in the future
dilute an investor's percentage of freely tradeable shares and may depress the
price of the Common Stock. Also, if substantial, such sales might also adversely
affect our ability to raise additional equity capital. However, most of the
approximately 6,420,000 shares believed to be "restricted securities" are held
by affiliates of the Company and must (by law) be sold subject to the volume
limitations of Rule 144 described above, thus restraining the number of shares
that can sold in any period of time.
31. Risk of Potential to Dilution Future Share Issuances; Outstanding
Warrants. We have registered an aggregate of 5,000,000 shares of Common Stock
for issuance in possible future business combination transactions. All of these
shares are still available for issuance in the future. Moreover, we have
registered an aggregate of 1,000,000 shares of Common Stock for issuance to
outside consultants to compensate them for services provided. Most of these
shares are still available for issuance in the future. For issuances of shares
in connection with acquisitions and issuances to consultants, our Board of
Directors will determine the timing and size of the issuances and the
consideration or services required therefor. Our Board of Directors intends to
use its reasonable business judgment to fulfill its fiduciary obligations to our
then existing stockholders in connection with any such issuance. Nonetheless,
future issuances of additional shares could cause immediate and substantial
dilution to the net tangible book value of shares of Common Stock issued and
outstanding immediately before such transaction. Any future decrease in the net
tangible book value of such issued and outstanding shares could materially and
adversely affect the market value of the shares. In addition, we have
outstanding certain warrants to purchase shares of Common Stock. We also have
the obligation to issue additional such warrants in the future. These warrants
permit the holders to purchase shares of Common Stock at specified prices. These
purchase prices may be less than the then current market price of the Common
Stock. A total of approximately 7.5 million additional shares of Common Stock
would be issued if all of the warrants currently outstanding (and we are
obligated to issue in the future) were exercised. Any shares of Common Stock
issued pursuant to these warrants would further dilute the percentage ownership
of existing stockholders. The terms on which we could obtain additional capital
during the life of these warrants may be adversely affected because of such
potential dilution.
32. Risks Relating to Low-Priced Securities. The trading prices of the
Common Stock have been below $5.00 per share. As a result of this price level,
trading in the Common Stock is subject to the requirements of certain rules
promulgated under the Exchange Act. These rules require additional disclosure by
broker-dealers in connection with any trades generally involving any non-NASDAQ
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions. Such rules require the delivery, before any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith, and impose various sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors (generally institutions). For these types of
transactions, the broker-dealer must determine the suitability of the penny
stock for the purchaser and receive the purchaser's written consent to the
transaction before sale. The additional burdens imposed upon broker-dealers by
such requirements may discourage broker-dealers from effecting transactions in
the Common Stock affected. As a consequence, the market liquidity of the Common
Stock could be severely limited by these regulatory requirements.
33. No Dividends. The holders of the Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out of funds
legally available therefore. To date, we have paid no cash dividends. The Board
of Directors does not intend to declare any dividends in the foreseeable future,
but instead intends to retain all earnings, if any, for use in our business
operations. If we obtain additional financing, our ability to declare any
dividends will probably be limited contractually.
34. Potential Year 2000 Problems. We believe that we have no potential
internal Year 2000 problems. Nonetheless, we recognize that the computer systems
of financial institutions and other vendors with which we will do business could
have Year 2000 problems that could adversely affect us. However, we have no
greater exposure to these types of problems than other businesses in general.
Nonetheless, we could be materially adversely affected by these problems in ways
that can not now be quantified. However, to avoid being adversely affected by
the Year 2000 problems of other persons, we have instituted a program of
carefully screening persons and companies with which we will do a material
amount of business and monitoring their efforts to avoid their own Year 2000
problems.
For all of the aforesaid reasons and others set forth herein, the shares covered
by this Prospectus involve a high degree of risk. You should be aware of these
and other factors set forth in this Prospectus.
<PAGE>
USE OF PROCEEDS
The shares covered by this Prospectus may be sold by the Selling
Stockholders from time to time at their discretion, and the Company will not
receive any proceeds from the sale of the shares. However, certain of the shares
covered by this Prospectus may be acquired by the Selling Stockholders pursuant
to exercises of stock options. The Company will receive the purchase price for
such shares upon exercise of such options. The Company expects that such
proceeds will be used for general corporate purposes.
DIVIDEND POLICY
The Company has paid no cash dividends on its Common Stock, and the Company
presently intents to retain earnings to finance the expansion of its business.
Payment of future dividends, if any, will be at the discretion of the Board of
Directors after taking into account various factors, including the Company's
financial condition, results of operations, current and anticipated cash needs
and plans for expansion. See "MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES."
PRICE RANGE OF COMMON STOCK
The Common Stock is traded on the OTC Bulletin Board under the symbol
"JVWB". As of February 16, 1999, the Company had approximately 243 holders of
record. Trading in the Common Stock commenced on June 30, 1998. Presented below
are the high and low closing prices of the Common Stock for the periods
indicated:
High(1) Low(1)
Fiscal year ending June 30, 1999:
Second Quarter $ .562 $ .125
First Quarter $1.250 $ .406
Fiscal year ended June 30, 1998:
Fourth Quarter $ .75 $ .75
- ---------------
(1) Reflects sole trade to occur during fiscal 1998 on June 30, 1998, the date
trading in the Common Stock commenced.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Summary
In general, JVWeb is structured to pursue two main business activities: 1)
the joint venturing of Brands that have strong on-line commerce potential, and
2) the building of a strong fee-for-service division to deepen our capabilities.
In this past quarter, management refined its focus on building a strong fee for
service division. A significant percentage of the resources of the company were
devoted to developing a well-defined marketing campaign around very specific
consulting services that emphasized the strengths of the company. At the present
time, JVWeb has no significant contracts signed as a result of these efforts.
Management anticipates seeing the benefits of this effort in the quarter ending
March 31, 1999.
We have established three potential profit centers within our
fee-for-service division. The first is a web-hosting service, based in Phoenix,
Arizona. The second is the web development capabilities of L&H that we market in
the U.S. The third is the strategic internet services consulting that is the
core expertise of JVWeb.
Among the resources that have been established to initiate the marketing of
a fee-for-service division are the previously announced web-hosting facility
(co-located with GTE), as well as the offices being established in New York and
San Francisco. The company continues to build on its relationship with L&H.
Management, for example, is exploring opportunities to leverage the capabilities
of L&H in the U.S., while offering its web-hosting and other services to L&H in
Europe. We are hopeful that these efforts will produce significant revenue
growth for us. However, at this time, we have not signed any significant
contracts as a result of these efforts.
Quarter ended December 31, 1998
Income statement
Revenue. Management had previously announced its first web-hosting customer
at the end of this quarter. Revenue for web-hosting will initiate in January,
1999, and we are hopeful it will grow as new customers are added. Management
also is hopeful consulting revenue will initiate in the quarter ending March 31,
1999.
General and Administrative Expenses. Out of the total G&A expenditures for
the quarter, 44%, or $55,000 was due to the write-off of accumulated
expenditures related to the aborted acquisition of Wall Street Whispers.
Management is continuing to have discussions with the owners of Whispers for a
joint marketing relationship around the Whispers newsletter, however, no
agreement has been reached at this time on that possibility. A material
percentage of the remaining G&A expenditures represented travel and
organizational costs associated with the establishment of a presence in New York
and California, as well as the pursuit of development with L&H in their Ipswich
(London) office. Additional expenditures were incurred in establishing the web
hosting capability in Phoenix, Arizona. Remaining G&A expenditures were related
to the costs of being a public company, including the associated costs of
maintaining a fully reporting status with the S.E.C.
Balance sheet
Cash. The principal shareholder and related parties, continue to fund the
minimal operations of the company on an as-needed basis.
Inventory. Inventory of $8,946 represents merchandise related to the
Dadandme and Frogletz product lines. Management continues to explore
relationships and joint venture opportunities that will support a marketing
campaign to build these on-line brands. At this time, no such talks are in
serious discussion stages.
Accounts Payable. As of February 15, 1999, a majority of the costs, which
were associated with the establishment of JVWeb as a public company, have been
paid.
Notes Payable to Related Parties. We anticipate paying off these notes in
1999.
Inception (October 28, 1997) to December 31, 1997 and December 31, 1998
General and Administrative Expenses. G&A expenditures for the period from
inception (October 28, 1997) to December 31, 1998 totaled $479,381 compared to
$42,828 for period from inception to December 31, 1997. G&A expenditures
totaling approximately $130,000 were incurred during the first and second
quarters of 1998 primarily in connection with the filing with the Securities and
Exchange Commission to become a public company as a spin-off of an existing
public company, which became effective May 12, 1998. During the quarter ended
September 30, 1998, the Company began building its management infrastructure
while also incurring the costs of developing its first website together with
related product design and the costs of being a public company. Total G&A costs
for this quarter totaled approximately $180,000. G&A expenses during the quarter
ended December 31, 1998 totaled approximately $125,000, including $55,000 due to
the write-off of accumulated expenditures related to the aborted acquisition of
Wall Street Whispers. The remaining G&A costs were incurred in establishing of a
presence in New York and California, as well as the pursuit of developments with
L & H in their London office, together with the costs of being a public company.
Other. The Company currently has cash on hand only sufficient to operate
throughout calendar 1999 on a fairly minimal scale. In order for the Company to
pursue its business plan in the manner it prefers, the Company anticipates that
it will need to raise additional funds in amounts that cannot now be precisely
ascertained due to the uncertainty of the actual growth of the Company. There
can be no assurance that the Company will be successful in raising the funds
that it needs.
The Company does not anticipate performing any research and development in
the next twelve months, other that which is performed in the normal course of
business as it develops its electronic commerce capabilities, such as the
testing of new, widely-available software for use in the Company's electronic
commerce pursuits. There are no expected purchases of any plant or significant
equipment. The Company does not anticipate any significant changes in the number
of employees, other than through possible acquisitions.
In November, 1997, the Company sold 500,000 shares of common stock and
1,500,000 shares of Class A warrants to LS Capital Corporation at a purchase
price of $5,000 pursuant to the related spin-off agreement.
In March, 1998, the Company issued 200,000 shares of common stock to a
private investor at a purchase price of $.25 per share.
BUSINESS
Introduction
JVWeb, Inc. (the "Company") was incorporated on October 28, 1997 under the
laws of the State of Delaware. The Company was formed for purposes of pursuing
electronic commerce opportunities. On May 20, 1998, the Company became
publicly-held through the distribution by LS Capital Corporation ("LS Capital")
of certain of its shares of the Company's common stock to LS Capital's
stockholders.
At the time the Company was formed, electronic commerce opportunities were
expected to arise in several different ways. However, the Company expected
primarily to offer products, services, content and advertising by means of sites
on the World Wide Web (the "Web") of the Internet. The Company expected that the
products, services, content and advertising would usually be offered by joint
ventures between the Company and established businesses although occasionally
they would be offered directly by the Company itself. In the case of joint
ventures, the Company expected to contribute technical expertise and (in certain
instances) financial assistance in developing the joint ventures' Web sites,
while the joint venture partners would be responsible for furnishing the joint
ventures' products or services, the content for the joint ventures' Web sites,
and the related business expertise. This area of the Company's business is
referred to herein as the brands-under-management division. The Company also
expected secondarily to develop a fee-for-service division to sell the
technological, marketing and other abilities that the Company had acquired or in
the future may acquire. While the Company originally gave a greater emphasis to
the brands-under-management division, as the business of the Company has
developed and continues to develop, the Company is now giving a greater emphasis
to the fee-for-service division. The Company's business continues in a
developmental stage.
The address of the Company is 5444 Westheimer, Suite 2080, Houston, Texas
77056, and its telephone number is 713/622-9287. The Company's own Web site is
located at http://www.jvweb.com. Information contained in the Company's Web site
shall not be deemed to be a part of this Prospectus.
Industry Background
The Internet is an increasingly significant global medium for
communications, content and online commerce. Growth in Internet usage has been
fueled by a number of factors, including the large and growing installed base of
personal computers in the workplace and home, advances in the performance and
speed of personal computers and modems, improvements in network infrastructure,
easier and cheaper access to the Internet and increased awareness of the
Internet among businesses and consumers.
The increasing functionality, accessibility and overall usage of the
Internet and online services have made them an attractive commercial medium. The
Internet and other online services are evolving into a unique sales and
marketing channel, just as retail stores, mail-order catalogs and television
shopping have done. In theory, electronic retailers have virtually unlimited
electronic shelf space and can offer customers a vast selection through
efficient searches and retrieval interfaces. Moreover, electronic retailers can
interact directly with customers by frequently adjusting their featured
selections, editorial insights, shopping interfaces, pricing and visual
presentations. Beyond the benefits of selection, purchasing is more convenient
than shopping in a physical retail store because electronic shopping can be done
24 hours a day and does not require a trip to a store. Web sites can present
advertising and marketing materials in new and compelling fashions, display
products and services in electronic catalogs, offer products and services for
sale electronically, process transactions and fulfill orders, provide customers
with rapid and accurate responses to their questions, and gather customer
feedback efficiently. The minimal cost to develop and maintain a Web site, the
ability to reach and serve a large and global group of customers electronically
from a central location, and the potential for personalized low-cost customer
interaction, provide additional economic benefits for electronic retailers.
Unlike traditional retail channels, electronic retailers do not have the
burdensome costs of managing and maintaining expensive retail real estate and a
significant retail store infrastructure or the continuous printing and mailing
costs of catalog marketing. Furthermore, electronic retailers are generally able
to conduct their businesses with fewer employee than traditional retailers.
Because of these advantages over traditional retailers, electronic retailers
have the potential to build large, global customer bases quickly and to achieve
superior economic returns over the long term. An increasingly broad base of
products and services is successfully being sold electronically, including
computers, travel services, brokerage services, automobiles, music and books. If
this trend continues, the migration from traditional shopping to electronic
shopping will effect dramatic changes in retailing as it has heretofore been
conducted.
In addition to the offering of products and services through electronic
commerce, the Internet has created a new medium for disseminating content, such
as the content historically delivered by newspapers, magazines and journals.
Electronic dissemination of content offers numerous advantages over historical
mediums of content dissemination. First, the content can be provided to
consumers more quickly, as the delays required by printing and delivery are
avoided. For example, a magazine that ordinarily is mailed for delivery on a
particular day can be made available electronically as soon as the magazine is
otherwise ready for print, at least one day before anticipated delivery. In
addition, content can be updated on a real time basis so that only current (and
no outdated) content appears. Moreover, the electronic content can be linked
instantaneously to related content of interest. While newspapers, magazines and
journals can offer only still-shot photography, electronic commerce can offer
moving and even live pictures much akin to television. Equally (if not most)
important, electronic content can be distributed at a much lower cost compared
to historical mediums because electronic dissemination does not involve printing
and delivery costs. The new medium of content dissemination provided by the
Internet has in turn lead to new forms of advertising, especially banner
advertisements that appear as Web sites are displayed. As the presence on the
Web of suppliers of content and advertising increases, the new forms of
advertising such as the banner advertisements should increase in prominence as
well, thus creating additional revenue opportunities.
Although businesses are pursuing electronic commerce rapidly and at
increasing rates, the basic differences of electronic commerce from historical
commerce require companies to take fundamentally new approaches. A number of
Internet professional services firms have emerged to assist businesses with the
development and implementation of their electronic commerce strategies. However,
these firms tend to be small and focused on a particular aspect of electronic
commerce, apparently lacking the necessary depth and integration of strategic,
technical and creative skills to meet all the electronic commerce needs of a
business. After analyzing the very fragmented Internet service industry,
management has concluded that:
1. Most traditional advertising and marketing agencies have
neither a proven track record of success in the area of
electronic commerce and lack the extensive technical skills
(such as application development, and legacy system and
database integration) required to solve increasingly complex
electronic commerce problems.
2. Most vendors of computer and technology products and services
lack the creative and marketing skills required to build
audiences and deliver unique and compelling content, and are
further constrained by their need to recommend their
proprietary brands.
3. Internet access service providers, whose core strength is in
providing Internet access and site hosting, typically lack
both the necessary creative and application development
skills.
Management believes that to provide fully competent Internet services, a service
provider must possesses a full range and integration of strategic, technical and
creative skills required for electronic commerce.
Businesses seeking to realize the benefits provided by electronic commerce
face a formidable series of challenges presented by the need to link business
and marketing strategies, new and rapidly changing technologies and continuously
updated content. The establishment and maintenance of a Web site to pursue
electronic commerce requires significant technical expertise in a number of
areas, such as electronic commerce systems, security and privacy technologies,
application and database programming, mainframe and legacy integration
technologies and advanced user interface and multimedia production. Marketing
expertise in a number of areas (including the development of audiences, greater
search engine presence, and broader ranges of links to the site) is also
required. Apparently, few businesses (especially small, emerging and mid-sized
businesses) have the time, money, and strategic, technical and creative skills
to implement an electronic commerce strategy on their own. In addition,
management believes that the novelty, complexity and rapid development of
electronic commerce has left many businesses (especially small, emerging and
mid-sized businesses) bewildered and reluctant to act, despite a strongly felt
need to become involved in electronic commerce.
Overall the Company believes that electronic commerce presents excellent
business opportunities for the foreseeable future. Because of the relative
novelty of electronic commerce, the Company believes that the market for
electronic commerce is fairly wide-open, although market leadership has already
been established in a number of respects. Nonetheless, plenty of opportunities
still exist. The Company believes that customer unfamiliarity and the fragmented
state of the electronic commerce market creates an opportunity for a company
with fully integrated strategic, technical and creative Internet skills that can
assist businesses. Despite the Company's optimism about the future of electronic
commerce, the pursuit of a plan of a business plan based on electronic commerce
is not without considerable risks. For more information about these risks, see
"BUSINESS AND PROPERTIES - RISK FACTORS - Dependence on the Internet, -
Uncertain Acceptance of the Internet as a Medium for Commerce, Developing
Market, - Internet Commerce Security Risks, - - Risks Associated with
Technological Change, - Risk of System Failure; Single Site, - Regulatory
Concerns, and - Other Potential Liability."
Web Sites
The proper development and implementation of a Web site for a business
involves a number of steps. First, a thorough study is undertaken to determine
the likelihood that the business will succeed in electronic commerce. Once the
study determines that the business is likely to succeed in electronic commerce,
a strategy for developing a Web site is developed by a team composed of the
business principals, advertising agency, web developer and content site manager.
A domain name is agreed upon and obtained. The Web site is then "story boarded"
or laid out conceptually and graphically. A web developer develops the structure
of the Web site, including electronic commerce systems; host integration;
implementation of third-party applications and security technologies; and
integration of hardware, software and Internet access products. A compelling
user interface is created to attract and hold the attention of the target
audience while conforming to brand images and marketing campaigns. A
relationship with a third-party vendor is established to provide secure,
state-of-the-art, high-availability Web site hosting and integrated services for
e-mail and secure electronic commerce. Once operational, a Web site requires
ongoing support services for content maintenance, site administration, technical
problems, assistance with the hosting environment, and software support. As the
Web site nears completion, electronic marketing objectives are developed to
establish and increase Web site traffic, strengthen brand awareness and generate
sales leads. Electronic media planning and purchasing, and electronic public
relations is undertaken. This is followed by efforts to optimize the Web site's
search engine presence, increase site access through hyperlink recruitment and
disseminate key messages to Internet newsgroups, mailing lists and forums.
Typically a Web site starts as a basic site costing several thousand dollars. It
can then become increasingly more complex through the addition of more Web
pages, links and commercial capability. Ultimately, an extremely complex Web
site can cost several million dollars.
The JVWeb Solution
The Company was founded to seek out and capitalize on business
opportunities presented by electronic commerce. The Company believes that the
anticipated migration from traditional shopping to electronic shopping, and the
anticipated increase in the electronic dissemination of content, will present
for the foreseeable future excellent business opportunities of at least two
particular types. The first type of opportunities presented is to offer
products, services and content that are now either not available at all or are
available only to a limited extent in electronic commerce, and to offer new
forms of advertising made available by the Internet. The second type of
opportunities presented is to provide Internet services to persons offering or
proposing to offer products, services, content or advertising in electronic
commerce or offering. Because these two types of opportunities are very
distinct, the Company has established two divisions to pursue these
opportunities separately. These divisions are the Company's
brands-under-management division and the Company's fee-for-service division.
While the Company originally gave a greater emphasis to its
brands-under-management division, the Company is now giving a greater emphasis
to its fee-for-service division.
Fee-For-Services Division
The Company's fee-for-services division provides clients with the vision,
expertise and resources required to develop new strategies and improve business
processes for electronic commerce. To capitalize on the opportunity presented by
the rapid growth in electronic commerce, the Company has developed certain
internal capabilities relating to electronic commerce and Internet services.
Moreover, the Company has formed and continues to form certain strategic
relationships with third parties to supplement the Company's internal
capabilities to ensure that the Company a full, integrated ensemble of
strategic, technical and creative skills required for electronic commerce and
Internet services. In each consulting engagement, the client can contract for
the specific services it requires, depending on the nature of the engagement and
the capabilities of the client's organization. The Company expects to bill most
of its engagements on a time and materials basis, although it may work on a
fixed-price basis.
The Company's fee-for-services division has been divided into three
distinct functional areas. The first functional area of the Company's
fee-for-services division provides strategic Internet services consulting. The
services provided by this area of the fee-for-services division include the
following:
* strategy consulting regarding business and marketing strategies
best suited for pursuing the client's business in electronic
commerce
* creation of a system or process design that defines the roles
that the system or process will perform for meeting the
client's strategic requirements
* development of a testable version of the client's system
including all necessary programs and components and a
compelling user interface for the system to enable it to
attract and hold the attention of the client's target audience
while conforming to the client's brand image and marketing
campaigns
* testing of the system in preparation of deployment into a full
production system and installation of the system after all
tests are completed
* audience development to increase Web site traffic, strengthening
brand awareness and generating sales leads
* maintenance of the Web site and its content, and provision of
technical support
The Company is undertaking efforts to bolster its strategic Internet services
consulting capabilities. In this connection, the Company is in the process of
organizing a subsidiary that will employ a number of strategic Internet service
consultants. The Company is currently interviewing persons with considerable
expertise relating to strategic Internet services to manage this subsidiary. The
identity of the manager and terms of such manager's employment arrangement are
currently being negotiated and have not yet been determined. There can be no
assurance that the subsidiary will be formed, an acceptable manager will be
found, or that an agreement with an acceptable manager will be entered into.
The second functional area of the Company's fee-for-services division
involves Web site development. This area developed out of a strategic alliance
that the Company formed during August 1998 with Heitmann S.A.C. ("Heitmann"), a
company based in the United Kingdom. Heitmann has designed, written, translated
and communicated technical information for over 25 years, working with some of
the world's largest multinationals. Because it has a network of 11 offices
across Europe and two production facilities in the United States and works in
the world's 25 most used languages, Heitmann has a broad geographical reach.
Heitmann has a particular emphasis in new media distribution and deploys
proprietary expertise in the publishing of Internet and Intranet technologies.
Since 1994 Heitmann has produced over 2,000 successful interactive information
projects. Pursuant to their strategic alliance, Heitmann will provide Web
development and other Internet related technical services on behalf of the
Company, and the Company will market these technical capabilities on a
fee-for-service basis in the United States. This new strategic partnership is an
outgrowth of the relationship between the two companies that has solidified over
time with the assistance provided by Heitmann in the creation of the Company's
showcase websites www.jvweb.com and www.dadandme.com. These projects
demonstrated the ability of the two companies to use Internet tools to complete
Web projects across international boundaries. In August 1998, Heitmann was
acquired by Lernout & Hauspie Speech Products ("L&H"), an international leader
in the development of advanced speech technology for various commercial
applications and products. The Company expects that the business operations of
Heitmann are expected to be merged into the business operations L&H, and that
the Company will continue with L&H the business relationship that it had with
Heitmann. The Company, on the one hand, and Heitmann or L&H, on the other hand,
have not entered into a legally binding agreement with regard to their
relationship, but the Company and L&H intend to explore, through their strategic
alliance, the basis for entering into a legally binding agreement in the future.
As an outgrowth of the Company's Web site development services, the Company
has developed a web-based communications service, which targets Advertising and
Public Relations Agencies in North America. The Company's niche-marketing plan
for this service will be launched from the Company's newly-established New York
satellite office. Advertising and public relations agencies headquartered in New
York City will be introduced to the new high-tech, highly customized service.
The Company intends to expand the marketing plan to San Francisco in early
March, and anticipates bringing the service to major sites across North America.
L&H will be primarily responsible for providing the actual Web site development
services, while the Company will be primarily responsible for marketing the
service. The Company expects to bill for these services on a time and materials
basis. Fees received will be split equally between the Company and L&H. The
Company will offer its web-based communication services over the Web site
"crisis-communications.com", which is now under development.
The third functional area of the Company's fee-for-services division
provides Web hosting services. In this connection, the Company has entered into
a Web hosting agreement with GTE Internetworking, a division of GTE Corporation.
Under the terms of this agreement, GTE makes available to the Company GTE's Web
Advantage Service from GTE's worldwide secure global data-center based in
Phoenix. GTE's Web Advantage Service is a high-performance, highly reliable,
cost-effective Web hosting service. Under the terms of this agreement, the
Company has access to a bandwidth of up to 10.0 Mbit/sec. This agreement allows
the Company to expand and contract its use of GTE's services as the Company's
traffic fluctuates. The charges that the Company will owe pursuant to the
agreement will depend on the Company's usage. The initial term of this agreement
is for one year. This agreement is renewable by the Company and is terminable by
the Company upon 60 days prior written notice. The Company believes that the GTE
agreement provides suitable Web hosting capacity for the foreseeable future. The
Company also believes that providing hosting services is critical because
hosting is an entry level service and creates the opportunity for offering and
selling additional services. The Company is already providing Web hosting
services to a major European government agency with a possible increase in Web
hosting work for other agencies of this government. The Company will offer its
Web hosting services over the Web site "webcatservers.com", which is now under
development.
The Company's objective regarding the fee-for-services division is to
become and remain a leading Internet services provider. The Company's strategy
to achieve this objective includes the following elements:
Strengthen Position as an Internet Services Provider. The Company is
continuing to strengthen its position as an Internet services provider
in order to provide clients with superior Internet solutions. The
Company intends to continue identifying, reviewing and integrating the
latest Internet technologies and accumulating and deploying the best
demonstrated practices for electronic commerce.
Developing Brand. In a fragmented industry that lacks brands strongly
identified with Internet services providers the Company believes that
it will need to build a well-recognized brand for its fee-for-services
division. The Company's brand development program will be designed to
reinforce the message that the Company's fee-for-services division can
provide a complete range of services to build and deploy e-commerce
solutions. The Company intends to build and differentiate its
fee-for-services division brand through excellent service and a variety
of marketing and promotional techniques, including advertising on other
Web sites and other media, conducting an ongoing public relations
campaign and developing business alliances and partnerships.
Develop Additional Strategic Relationships. The Company has developed a
number of informal strategic relationships with advertisement agencies,
web developers, site content managers, site hosts and other persons
whose services are necessary to develop and implement an electronic
commerce strategy. Few of these strategic relationships has yet
resulted in a legal binding relationship. While the Company intends to
develop the ability to render many of these services internally, the
Company also intends to continue developing strategic relationships so
that the Company can have adequate access to such services for the
foreseeable future.
Brands-Under-Management Division
This division was formed for purposes of pursuing electronic commerce
opportunities involving the sale of products and services in electronic commerce
and the offering of content and advertising over the Internet. Although the
Company expects to undertake some of these electronic commerce opportunities
alone, the Company believes that it will undertake most of these electronic
commerce opportunities through joint ventures with established, profitable
businesses whose products, services or content (in most cases) are not currently
being offered electronically. The Company would furnish expertise in electronic
commerce (and in certain instances financial assistance) for an equity interest
in the resulting electronic business, in lieu of an up-front payment of cash.
Because of the Company's willingness to enter into such an arrangement, the
Company expects to be an attractive joint venture partner for many established
business seeking to become engaged in electronic commerce. This willingness will
allow selected businesses to enter into electronic commerce with minimal
financial investment and risk, while providing the Company with a substantial
potential return for its services and financial contributions. The Company
expects that for the foreseeable future the financial assistance that the
Company will provide to a joint venture in which it participates may range from
fairly minimal amounts to approximately $100,000 at the high end. In order to
provide this financial assistance, the Company will have to procure funds from
various sources, which are discussed in "RISK FACTORS - - Future Capital Needs;
Uncertainty of Additional Financing" above. There can be no assurance that the
Company will be successful in procuring these funds. While the Company
originally gave a greater emphasis to this brands-under-management division, the
Company is now giving a greater emphasis to its fee-for-service division.
However, the Company intends to consider attractive joint venture electronic
commerce opportunities as they are presented and as funds are available. As of
the present, the Company does not have funds available to pursue any meaningful
joint venture electronic commerce opportunity. Nonetheless, the Company's
limited experience thus far indicates that for the foreseeable future the
Company will have an ample array of joint venture prospects to consider if and
when funds become available.
Management believes that opportunities in electronic commerce are either
commerce-driven or content-driven. Commerce-driven opportunities involve the
sale of products and services through electronic mediums, such as electronic
stores. Content-driven opportunities involve the provision of content (such as
that historically provided by newspapers, magazines and journals) through
electronic mediums, the attraction of consumers to such content, and the
offering of advertising (and even products and services) in connection with the
provision of such content. The Company will consider both commerce-driven or
content-driven opportunities.
The Company's brands-under-management division has attempted a couple of
projects. The first project was the development of its wholly-owned Web site
known as "www.dadandme.com." This site became operational on March 20, 1998.
This site is dedicated to fortifying and enhancing fatherhood and offering
products sold under the "Dad & me" logo. The Company has decided not to
aggressively market this site at this time, although the future marketing of
this site remains a possibility. The Company used www.dadandme.com as a test
site for future Web sites to be developed by the Company. In this connection,
the Company entered into an agreement to become the exclusive on-line
distributor for "Frogletz", Chameleon Casual's line of children's play clothing.
Also, on July 31, 1998, the Company entered into an agreement to acquire all of
the assets comprising a financial publication know as "Wall Street Whispers", an
on-line daily financial publication (the "Publication"). The purchase price for
the Publication was $140,000, payable over time. On October 28, 1998 the Company
decided to abandon its proposed acquisition of the Publication. The Company had
paid a total of $55,000 towards the purchase price and was required to pay a
final balloon installment in the amount of $85,000 by October 15, 1998. The
decline in the stock market during August 1998 and the subsequent volatility
raised serious doubts as to the desirability of consummating the acquisition of
the Publication as well as the Company's ability to finance such acquisition.
After twice extending the due date for the final balloon installment of the
purchase price and after the completion of an exhaustive analysis of the
acquisition of the Publication, the Company elected to abandon such acquisition.
The agreement governing the acquisition allowed the prospective sellers to
retain all amounts of the purchase price thus far paid.
When a joint venture prospect is presented in the future, a thorough study
will be undertaken of the prospect's strategic market position, business
requirements and existing systems and capabilities, to determine the likelihood
that the prospect's business will succeed in electronic commerce. After the
study, the Company's site management team (composed of the site administrator,
web marketing consultant, financial controller and project manager) will either
accept or reject the prospect. This decision will be based on a number of
factors, such as the prospect's historical or prospective ability to fulfill
orders, the lack of a clearly perceived electronic commerce strategy, the lack
of perceived electronic market interest and the size of the initial budget in
relation to the related risk. Currently, the Company intends to charge a $2,500
application fee to defer the costs of screening a prospect. If the Company
decides not to pursue a joint venture with the prospect, the Company will
develop a basic Web site for the prospect in consideration of the application
fee.
If a prospect is accepted, the Company will enter into negotiations with
the prospect to formalize an on-going joint venture relationship. The Company
expects that the joint ventures it forms will assume the form of corporations or
limited liability companies organized in Delaware (a favorable state for
corporations), Texas (the state in which the Company is headquartered), or
another favorable jurisdiction. The Company expects that it will own between 20%
to 80% of the outstanding equity interests in each joint venture depending on
the relative contributions of the venturers. The documentation governing the
joint venture will delineate the respective responsibilities of the Company and
its joint venture partner. In the case of the Company, these responsibilities
are expected to include the contribution of necessary strategic, technical and
creative skills and (in certain instances) financial assistance in developing
the joint venture's Web site. The joint venture partner's responsibilities will
include the furnishing of the joint ventures' products or services, the content
for the joint ventures' Web sites, and the related business expertise. The
Company expects that it and its joint venture partner will have management
authority with respect to the respective areas for which they have
responsibility. The capital contributions of the venturers should be fairly
minimal, and will be worked out on a case-by-case basis. The Company expects
that as the joint ventures with commerce-driven Web sites receive revenues, such
revenues will be first used to reimburse the joint venture partner for the costs
of providing the joint venture's product or services, then such revenues will be
used to pay other joint venture expenses, and then the remainder will be
distributed to the venturers in accordance with their percentage ownership. A
similar scheme will be used for joint ventures with content-driven Web sites,
except that the joint ventures' revenues are expected to result from additional
advertising and additional subscription to the underlying hardcopy publication
resulting from the Web sites. The Company expects that the documentation
governing the joint venture will include a buy-sell arrangement whereby either
the Company or its joint venture partner may terminate its relationship with the
other by setting the price and terms of the purchase of one of the venturer's
interest and allowing the other venturer to elect to sell to or buy out the
venturer setting the price and terms for such price and upon such terms. The
Company also expects that the terms of the joint ventures will be renewable on
an annual basis and the documentation governing the joint venture will provide
for the sale of the joint venture's business upon dissolution either to a third
party, or to the Company or its joint venture partner at an appraised price.
Other Electronic Commerce Opportunities
In addition to the development of the Company's fee-for-services and
brands-under-management divisions, the Company intends to consider other
electronic commerce opportunities presented to it. The Company intends to select
only those opportunities (if any) that present the greatest likelihood of
success.
Acquisitions
The Company originally intended to pursue an active acquisition program in
an effort to foster the Company's growth over and above the growth that can be
achieved internally. The Company had registered 5,000,000 shares of Common Stock
for this purpose. The Company does not now intend to conduct an active
acquisition program, but may consider select acquisitions on a case-by-case
basis. The Company does not now have any possible acquisitions under
consideration.
The Company has not developed, nor does it currently intend to develop, a
valuation model and a standardized transaction structure it will use. Instead,
the Company anticipates considering each acquisition on a case-by-case basis.
However, the Company expects that the purchase price for acquisition candidate
will be based on quantitative factors, including historical revenues,
profitability, financial condition and contract backlog, and the Company's
qualitative evaluation of the candidate's management team, operational
compatibility and customer base. Nonetheless, the Company expects that any
acquisition would assume the form of a merger in exchange for shares of Common
Stock.
Any acquisition is expected to be accounted for using the
pooling-of-interests method of accounting. However, some acquisitions may be
accounted for using the purchase method of accounting. Under this method of
accounting, for each acquisition, a portion of the purchase price would be
allocated to the tangible and identifiable intangible assets acquired and
liabilities assumed based on their respective fair values on the acquisition
date. This portion would include both (i) amounts allocated to in-process
technology and immediately charged to operations and (ii) amounts allocated to
completed technology and amortized on a straight-line basis over the estimated
useful life of the technology of six months. The portion of the purchase price
in excess of tangible and identifiable intangible assets and liabilities assumed
would be allocated to goodwill and amortized on a straight-line basis over the
estimated period of benefit, which ranges from one to two years. The results of
operations of the acquired entity would be consolidated with those of the
Company as of the date the Company acquires effective control of the acquired
entity, which generally would occur prior to the formal legal closing of the
transaction and the physical exchange of acquisition consideration. In addition,
the Company may grant stock options to employees of an acquired company to
provide them with an incentive to contribute to the success of the Company's
overall organization. As a result of both the purchase accounting adjustments
and charges for the stock options just described, the Company may incur
significant non-cash expenses related to its acquisitions.
Acquisitions also a number of risks, including adverse effects on the
Company's reported operating results from increases in goodwill amortization,
acquired in-process technology, stock compensation expense and increased
compensation expenses resulting from newly hired employees, the diversion of
management attention, risks associated with the subsequent integration of
acquired businesses, potential disputes with the sellers of one or more acquired
entities and the failure to retain key acquired personnel. Client satisfaction
or performance problems with an acquired firm also materially and adversely
affect the reputation of the Company as a whole, and any acquired company could
significantly fail to meet the Company's expectations. Due to all of the
foregoing, any individual future acquisition may materially and adversely affect
the Company's business, results of operations, financial condition and cash
flows. If the Company issues Common Stock to complete future acquisitions as it
expects to, there will be ownership dilution to existing stockholders. In
addition, to the extent the Company chooses to pay cash consideration in such
acquisitions, the Company may be required to obtain additional financing and
there can be no assurance that such financing will be available on favorable
terms, if at all.
Intellectual Property
The Company regards its service marks, trademarks, trade dress, trade
secrets and similar intellectual property as critical to its success, and relies
on trademark law, trade secret protection and confidentiality and/or license
agreements with its employees, customers, partners and others to protect its
proprietary rights. The Company pursues the registration of its trademarks and
service marks in the U.S., and has applied for the registration of certain of
its trademarks and service marks. Effective trademark, service mark, and trade
secret protection may not be available in every country in which the Company's
products and services are made available electronically. The Company may license
to third parties in the future certain of its proprietary rights, such as
trademarks. While the Company will attempt to ensure that the quality of its
brands are maintained by such licensees, there can be no assurance that such
licensees will not take actions that might materially adversely affect the value
of the Company's proprietary rights or reputation, which could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations. There can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate or that third parties
will not infringe or misappropriate the Company's trademarks, trade dress and
similar proprietary rights. In addition, there can be no assurance that other
parties will not assert infringement claims against the Company. The Company may
be subject to legal proceedings and claims from time to time in the ordinary
course of its business, including claims of alleged infringement of the
trademarks and other intellectual property rights of third parties by the
Company and its licensees. Such claims, even if not meritorious, could result in
the expenditure of significant financial and managerial resources.
Market and Marketing
With respect to the Company's fee-for-service division, the Company's
marketing efforts are dedicated to demonstrating to key decision makers in
prospective clients the benefits of electronic commerce and the use of Internet
solutions, and the effectiveness of the Company's services. The Company's
marketing program strives to accomplish the following:
* Enhance the Company's Brand. The continued strengthening of
the Company's brand is crucial to the achievement of the
Company's objective of becoming a recognized provider of
Internet professional services. The Company's brand
development efforts are designed to reinforce the message that
the Company can provide a complete range of services to build
and deploy electronic commerce and Internet solutions.
* Develop Marketing and Sales Tools. The Company has developed
marketing and sales materials to be used in connection with
the Company's business generation efforts. These materials
center upon a brochure regarding the Company's web-based
web-based communication service. These materials are designed
to increase the effectiveness of the sales and marketing
efforts of the Company.
* Generate Client Leads. The Company's marketing campaigns are
intended to generate client leads through the use of multiple
forms of media, currently including direct mail, in-person
sales calls and trade show programs. The Company has recently
conducted a mailing of brochures regarding its web-based
communication service to large public relations agencies based
in New York. The Company plans to conduct follow-up sales
calls regarding this mailing in the immediate future. These
sales calls will be conducted by a four-person team composed
of two representatives from the Company and two technical
representatives from L&H. A similar program of brochure
mailings and sales calls is expected to be conducted in the
near future in the San Francisco area. The marketing of the
Company's web-based communication services will be used as a
foundation for marketing the other services of the Company's
fee-for-services division. Furthermore, L&H has invited the
Company to participate in a program of approximately 20 trade
shows to be held over the next year. In addition to the
Company's own sales efforts, L&H will be marketing the
Company's strategic Internet consulting services overseas,
primarily in England.
In the future, the Company may employ a variety of other media, program and
product development, business development and promotional activities to market
its fee-for-service division. For example, the Company may place advertisements
on various Web sites. These advertisements should usually take the form of
banners that encourage readers to click through directly to the Company's Web
sites. The Company also may enter into co-marketing agreement pursuant to which
links to the Company's Web sites will be featured on other, non-Company Web
sites. The Company also may engage in a coordinated program of print advertising
in specialized and general circulation newspapers and magazines. The Company
hopes that in the future it will receive free publicity such in the form of
being featured in a wide variety of television shows, articles and radio
programs and widely-read portions of the Internet, such as portions included on
Netscape and Yahoo!
With respect to the Company's brands-under-management division, the
Company's marketing strategies will be designed to strengthen its brand names,
increase customer traffic to its Web sites, build strong customer loyalty,
maximize repeat purchases and develop incremental revenue opportunities. The
Company intends to build customer loyalty by creatively applying technology to
deliver personalized programs and service, as well as creative and flexible
merchandising. The Company will be able to provide increasingly targeted and
customized services by using the extensive customer preference and behavioral
data obtained as a result of its experience. The Internet allows rapid and
effective experimentation and analysis, instant user feedback and efficient
"redecorating of the store for each and every customer," all of which the
Company intends to incorporate in its merchandising. In contrast to traditional
direct-marketing efforts, the Company's personalized notification services will
send customers highly customized notices at customers' request. By offering
customers a compelling and personalized value proposition, the Company will seek
to increase the number of visitors that make a purchase, to encourage repeat
visits and purchases and to extend customer retention. Loyal, satisfied
customers also generate word-of-mouth advertising and awareness, and are able to
reach thousands of other customers and potential customers because of the reach
of electronic commerce.
Technology
The Company has implemented a broad array of site management, customer
interaction, transaction-processing and fulfillment services and systems using
commercially available, licensed technologies. The Company's current strategy is
to license commercially available technology whenever possible rather than seek
internally developed solutions.
The Company will use a set of applications for accepting and validating
customer orders, organizing, placing and managing orders with vendors, receiving
product and assigning it to customer orders, and managing shipment of products
and services to customers based on various ordering criteria. These applications
will also manage the process of accepting, authorizing and charging customer
credit cards. In addition, the Company's systems will allow it to maintain
ongoing automated e-mail communications with customers throughout the ordering
process at a negligible incremental cost. These systems will automate many
routine communications entirely, facilitate management of customer e-mail
inquiries and allow customers (on a self-service basis) to check order status,
change their e-mail address or password, and check subscriptions to personal
notification services.
A group of systems administrators and network managers will monitor and
operate the Company's Web sites, network operations and transaction-processing
systems. The continued uninterrupted operation of the Company's Web sites and
transaction-processing systems is essential to its businesses, and the site
operations staff is expected to ensure, to the greatest extent possible, the
reliability of the Company's Web sites and transaction-processing systems.
Competition
In general, the market for Internet professional services and electronic
commerce are relatively new, intensely competitive, rapidly evolving and subject
to rapid technological change. The Company expects competition to persist,
intensify and increase in the future. Barriers to entry are minimal, and new
competitors can enters these markets at a relatively low cost. Most of the
Company's current and potential competitors have longer operating histories,
larger installed client bases, longer relationships with clients and
significantly greater financial, technical, marketing and public relations
resources than the Company and could decide at any time to increase their
resource commitments to the Company's markets. In addition, these markets are
subject to continuing definition, and, as a result, the core business of certain
of the Company's competitors may better position them to compete in these
markets as they mature. Competition of the type described above could materially
adversely affect the Company's business, results of operations and financial
condition.
With regard to the Company's fee-for-services division, the Company
believes that the principal competitive factors in its market are strategic
expertise, technical knowledge and creative skills, brand recognition,
reliability of the delivered solution, client service and price. There can be no
assurance that existing or future competitors will not develop or offer services
that provide significant performance, price, creative or other advantages over
those offered by the Company, which could have a material adverse effect on the
Company's business, results of operations and financial condition. The Company
has no patented technology that would preclude or inhibit competitors from
entering the Internet professional services market.
With regard to the Company's brands-under-management division, the Company
believes that the principal competitive factors in its markets will be brand
recognition, selection, personalized services, convenience, price,
accessibility, customer service, quality of editorial and other site content and
reliability and speed of fulfillment, and the Company intends to compete
vigorously in all of these aspects. Nonetheless, electronic retailers may be
acquired by, receive investments from or enter into other commercial
relationships with larger, well-established and well-financed companies as use
of the Internet and electronic commerce increases. Certain of the Company's
competitors may be able to secure merchandise from vendors on more favorable
terms, devote greater resources to marketing and promotional campaigns, adopt
more aggressive pricing or inventory availability policies and devote
substantially more resources to their Web sites and systems development than the
Company. Increased competition may result in reduced operating margins, loss of
market share and a diminished brand franchise. Further, as a strategic response
to changes in the competitive environment, the Company may from time to time
make certain pricing, service or marketing decisions or acquisitions that could
have a material adverse effect on its business, prospects, financial condition
and results of operations. In addition, companies that control access to
transactions through network access or Web browsers could promote the Company's
competitors or charge the Company a substantial fee for inclusion.
Employees
The Company currently has only one employee, Greg J. Micek. Mr. Micek
currently devotes all of his business time and attention to the Company. The
Company expects that it may have as many as five to ten employees within the
next year, excluding employees of any acquired businesses. Although the
competition for employees is fairly intense, the Company does not now foresee
problems in hiring additional qualified employees to meet its labor needs.
Facilities
The Company currently leases a small amount of office space for its
corporate offices on a month-to-month basis and a small amount of rack space for
servers in GTE's data-center based in Phoenix on a year-to-year basis. The
Company also owns the intellectual property rights in its domain names and Web
sites. The Company does not own any significant tangible property.
Legal Proceedings
Since the date of its organization through the date of this Prospectus, the
Company has not been involved in any legal proceedings. There can be no
assurance, however, that the Company will not in the future be involved in
litigation incidental to the conduct of its business.
Available Information
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 and exhibits relating
thereto (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), of which this Prospectus is a part. This Prospectus does
not contain all the information set forth in the Registration Statement.
Reference is made to such Registration Statement for further information with
respect to the Company and the securities of the Company covered by this
Prospectus. Statements contained herein concerning the provisions of documents
are necessarily summaries of such documents, and each statement is qualified in
its entirety by reference to the copy of the related document filed with the
Commission.
The Company has registered as a reporting company under the Securities
Exchange Act of 1934 (the "Exchange Act"). As a consequence, the Company will
file with the Commission Annual Reports on Form 10-KSB, Quarterly Reports on
Form 10-QSB, and Current Reports on Form 8-K. The Annual Reports on Form 10-KSB
will contain audited financial statements. After they are filed, these reports
can be inspected at, and copies thereof may be obtained at prescribed rates, at
the Commission's Public Reference Room located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further
information on the Public Reference Room. The Commission maintains a World Wide
Web site that contains reports, proxy statements and information statements and
other information (including the Registration Statement) regarding issuers that
file electronically with the Commission. The address of such site is
http://www.sec.gov. The Company's reports can be inspected at, and copies
downloaded from, the Commission's World Wide Web.
MANAGEMENT
The directors and executive officers of the Company are as follows:
Name Age Positions
Greg J. Micek 44 Director, President
Lewis E. Ball 67 Director, Treasurer &
Secretary
Kevin Dotson 34 Key Consultant
Greg J. Micek has served as a Director and President of the Company since
inception. Since 1983, Mr. Micek has been a principal of The Micek Group, a
business consulting firm. In this connection, from June 1996 to June 1997 he
served as President and Chief Executive Officer of HyperDynamics Corporation
(formerly Ram-Z Enterprises, Inc.), a publicly traded company focusing on
technology acquisitions. In addition, from 1992 to 1994 Mr. Micek served as the
Project Manager for the City of Austin's Small Contractor Support Network, and
from 1991 to 1992, he served as a business reorganization consultant for Parker
Brothers, Inc. Mr. Micek received a Bachelor of Arts and a Doctorate of
Jurisprudence from Creighton University.
Lewis E. Ball has served as a director of the Company since November 15,
1997. He has been a financial consultant to a number of companies since 1993.
From June 1996 to January 1997, Mr. Ball served as the Chief Financial Officer
of HyperDynamics Corporation (formerly Ram-Z Enterprises, Inc.). Mr. Ball has
many years of industry experience as a Chief Financial Officer and Director of
several major public companies, including Stewart & Stevenson Services, Inc. and
Richmond Tank Car Company (from 1983 to 1993). He is a Certified Public
Accountant and a Certified Management Accountant. Mr. Ball earned a Bachelor of
Business Administration in Finance from the University of Texas at Austin,
followed by post-graduate studies in accounting at the University of Houston.
Kevin Dotson has served as a key consultant to the Company since December
1, 1997. Since 1995, Mr. Dotson has owned MicroVision Solutions, an Internet
consulting and Web development company. From 1994 to 1995, he worked as a data
entry specialist for Columbia/HCA SMBC in Houston. Earlier he had served in the
United States Army for five years training military personnel on computer
systems. Mr. Dotson attended Arizona State University.
The authorized number of directors of the Company is presently fixed at
two. Each director serves for a term of one year that expires at the following
annual stockholders' meeting. Each officer serves at the pleasure of the Board
of Directors and until a successor has been qualified and appointed. Currently,
directors of the Company receive no remuneration for their services as such, but
the Company will reimburse the directors for any expenses incurred in attending
any directors meeting.
There are no family relationships, or other arrangements or understandings
between or among any of the directors, executive officers or other person
pursuant to which such person was selected to serve as a director or officer.
EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS
Summary Compensation Table
The following table sets forth the compensation paid by the Company to its
Chief Executive Officer for services in all capacities to the Company (no
executive officer of the Company had total annual salary and bonus for the
fiscal year ended June 30, 1998 exceeding $100,000).
Summary Compensation Table (1)
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
(a) (b) (c) (g)
Fiscal
Name and Year Securities Underlying
Principal Position Ended Salary Options (number of shares)
<S> <C> <C> <C>
Greg J. Micek 6/30/98 (2) 2,000,000
Chief Executive
Officer and
President
</TABLE>
- -----------------
(1) The Columns designated by the SEC for the reporting of certain bonuses,
other annual compensation, long-term compensation, including awards of
restricted stock, long term incentive plan payouts, and all other
compensation, have been eliminated as no such bonuses, awards, payouts
or compensation were awarded to, earned by or paid to any specified
person during any fiscal year covered by the table.
(2) Mr. Micek is entitled to an annual salary of $60,000; however, he
voluntary elected not to receive any portion of his salary during
fiscal 1998 and has not yet received any portion of his salary during
fiscal 1999.
<PAGE>
Stock Option Grants
The following table sets forth information pertaining to stock options
granted during the fiscal year ended June 30, 1998. The Company has not granted
stock appreciation rights ("SAR's") of any kind.
Option Grants in the Last Fiscal Year
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Percentage of Total
Underlying Options Granted
Options to Employees Exercise Expiration
Name Granted in Fiscal Year Price Date
<S> <C> <C> <C> <C>
Greg J. Micek 2,000,000 100% $.10 December 1, 2002
</TABLE>
Option Exercises/Value of Unexercised Options
The following table sets forth the number of securities underlying options
exercisable at June 30, 1998, and the value at June 30, 1998 of exercisable
in-the-money options remaining outstanding as to the Chief Executive Officer of
the Company. No SAR's of any kind have been granted.
Aggregated Option Value
<TABLE>
<CAPTION>
(a) (d) (e)
Number of Securities
Underlying Unexercised Value of Unexercised
Options at June 30, 1998 In-the-Money Options at
(Numbers of Shares) June 30, 1998
Name Exercisable Exercisable
<S> <C> <C>
Greg J. Micek 2,000,000 $130,000(2)
</TABLE>
- ---------------------
(1) The Columns designated by the SEC for the reporting of the number of
shares acquired on exercise, the value realized, and the number and
value of unexercisable options have been eliminated as no options were
exercised and no unexercisable options existed during the fiscal year
covered by the table.
(2) The price of the Common Stock used for computing this value was the
$.75 per share closing bid price of the Common Stock on the OTC
Bulletin Board on June 30, 1998.
Other Plans
The Company has no other deferred compensation, pension or retirement
plans in which executive officers participate.
Compensation Agreement with Key Personnel
The Company has entered into an employment agreement (the "Employment
Agreement") with Greg J. Micek, a Director and the President of the Company. The
Employment Agreement has a term of three years and will expire in accordance
with its terms in November 2000. Under the Employment Agreement, Mr. Micek is to
receive an annual salary of $60,000, although as of the date of this Prospectus
he not yet received any payment from the Company on his salary. Mr. Micek is
also entitled to participate in any and all employee benefit plans hereafter
established for the employees of the Company. The Employment Agreement contains
a covenant not to compete barring Mr. Micek from engaging in the electronic
commerce business anywhere in the world for one year after the termination of
the Employment Agreement by the Company with cause or by Mr. Micek without
cause. Moreover, pursuant to an agreement between the Company and Mr. Micek, the
Company granted to Mr. Micek options to purchase 2,000,000 shares of Common
Stock at a per-share purchase price of $.10. The options have a term of five
years.
The Company has entered into an agreement with Kevin Dotson, a person who
provides Internet consulting services to the Company. This agreement provides
that, for providing consulting services to the Company, the Company shall issue
to Mr. Dotson options to purchase shares of Common Stock, at a purchase price
per share equal to the fair market value, on any day on which Mr. Dotson
provides consulting services to the Company. The number of shares with respect
to which Mr. Dotson will be issued options will depend on the number of hours of
consulting services that he provides on any particular day. Mr. Dotson will be
issued an option to purchase 250 shares (on any day on which he consults for up
to four hours), 500 shares (on any day on which he consults for more than four
hours and up to eight hours), 750 shares (on any day on which he consults for
more than eight hours and up to ten hours) and 1,000 shares (on any day on which
he consults for more than ten hours). Notwithstanding the preceding, the maximum
number of shares, with respect to which Mr. Dotson may be granted options
pursuant to the Dotson Option Agreement, is 250,000. Each option issued under
the Dotson Option Agreement will have a term of five years after the date it is
issued. As of March 2, 1999, Mr. Dotson had been issued under his agreement
options to purchase 340,000 shares of Common Stock. The exact number of shares
of Common Stock with respect to which options will be issued to Mr. Dotson can
not now be determined.
Certain Transactions
In connection with the organization of the Company, the Company issued to
Mr. Micek 6.2 million shares of Common Stock in consideration of a payment of
$62,000. The terms and conditions of Mr. Micek's employment with the Company and
the grant of a stock option to him in this connection are discussed in the
subsection captioned "Compensation Agreement with Key Personnel" immediately
preceding.
As a finder's fee for making the introductions leading to the investment of
LS Capital in the Company and for a payment of $.01 per share, the Company
issued to Lewis E. Ball, a director of the Company, 100,000 shares of Common
Stock.
DETERMINATION OF OFFERING PRICE
The shares covered by this Prospectus may be offered for sale from time to
time by the Selling Stockholders. Such sales may be on the OTC Bulletin Board,
elsewhere in the over-the-counter market, in negotiated transactions or
otherwise at prices and at terms then prevailing or at prices related to the
then-current market prices or at such other prices as the Selling Stockholders
may determine in negotiated transactions.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of February 16, 1999 information
regarding the beneficial ownership of Common Stock (i) by each person who is
known by the Company to own beneficially more than 5% of the outstanding Common
Stock; (ii) by each director; and (iii) by all directors and officers as a
group.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Name and Address of Prior to Offering(1) After Offering(1)(2)
Beneficial Owner Number Percent Number Percent
<S> <C> <C> <C> <C>
Greg J. Micek 8,050,000(3) 57.8% 8,050,000(3) 55.4%
5444 Westheimer, Suite 2080
Houston, Texas 77056
Lewis E. Ball 120,000 * 100,000 *
6122 Valley Forge
Houston, Texas 77057
All directors and officers 8,170,000(4) 58.6% 8,150,000(5) 56.1%
as a group (two persons)
</TABLE>
(1) Includes shares Stock beneficially owned pursuant to options and warrants
exercisable within 60 days after the date of this Prospectus.
(2) Takes into account the issuance of certain shares being registered.
(3) Includes 6,050,000 shares owned outright and 2,000,000 shares that may be
purchased pursuant an option currently exercisable.
(4) Includes 6,170,000 shares owned outright and 2,000,000 shares that may be
purchased pursuant an option currently exercisable.
(5) Includes 6,150,000 shares owned outright and 2,000,000 shares that may be
purchased pursuant an option currently exercisable.
* Less than one percent.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information as of February 16, 1999
pertaining to the beneficial ownership of Common Stock by the Selling
Stockholders.
<TABLE>
<CAPTION>
Beneficial Ownership Number of Shares Beneficial Ownership
Stockholder Prior to Offering Being Offered After Offering (1),(2)
<S> <C> <C> <C>
Tanye Capital Corp. 564,000(3) 490,000 74,000(4)
Equitrust Mortgage 306,483(5) 150,000 156,483(6)
Corporation
Kevin Dotson 252,500(7) 140,000 112,500(8)
DeMonte & Associates 130,000(9) 120,000 10,000(10)
Randall Heinrich 110,000(11) 100,000 10,000(12)
Nicholas Rockecharlie 25,000(13) 25,000 -0-
Lewis E. Ball 120,000 20,000 100,000
Dudley Anderson 42,500(14) 14,000 28,500(15)
Arthur Hartman 20,000(16) 20,000 -0-
Pat Springle 13,000(17) 13,000 -0-
</TABLE>
(1) Assumes the offer and sale of all shares being registered.
(2) Beneficial ownership of each Selling Stockholder after the offering is
less than 1% of Common Stock outstanding other than in the case of
Equitrust Mortgage Corporation whose ownership will be approximately
1.1% of Common Stock outstanding.
(3) Includes 242,000 shares of Common Stock that may be issued more than 60
days into the future pursuant to a services agreement that provides for
termination in certain circumstances; includes 50,000 shares owned
outright and 24,000 shares that may purchased pursuant to the Company's
Class A Warrants, which are currently exercisable, in both cases by KJM
Capital Corp., a related corporation under common control with Tanye
Capital Corp, which beneficial ownership Tanye Capital Corp. expressly
disclaims.
(4) Includes 50,000 shares owned outright and 24,000 shares that may
purchased pursuant to the Company's Class A Warrants, which are
currently exercisable, in both cases by KJM Capital Corp., a related
corporation under common control with Tanye Capital Corp, which
beneficial ownership Tanye Capital Corp. expressly disclaims.
(5) Includes 254,328 shares owned outright and 7,312 shares that may
purchased pursuant to the Company's Class A Warrants, which are
currently exercisable; includes 41,243 shares owned outright by Kent E.
Lovelace, Jr., President and controlling shareholder of Equitrust
Mortgage Corporation; includes 720 shares owned outright and 2,880
shares that may purchased pursuant to the Company's Class A Warrants,
which are currently exercisable, by Cheryl Lovelace, the wife of Kent
E. Lovelace, Jr., over which Mr. Lovelace shares voting and investment
power.
(6) Includes 104,328 shares owned outright and 7,312 shares that may
purchased pursuant to the Company's Class A Warrants, which are
currently exercisable; includes 41,243 shares owned outright by Kent E.
Lovelace, Jr., President and controlling shareholder of Equitrust
Mortgage Corporation; includes 720 shares owned outright and 2,880
shares that may purchased pursuant to the Company's Class A Warrants,
which are currently exercisable, by Cheryl Lovelace, the wife of Kent
E. Lovelace, Jr., over which Mr. Lovelace shares voting and investment
power.
(7) Includes 12,500 shares owned outright and 240,000 shares that may
purchased pursuant to stock options, which are currently exercisable.
(8) Includes 12,500 shares owned outright and 100,000 shares that may
purchased pursuant to stock options, which are currently exercisable.
(9) Includes 10,000 shares owned outright and 120,000 shares that may
purchased pursuant to stock options, which are currently exercisable.
(10) Includes 10,000 shares owned outright.
(11) Includes 80,000 shares of Common Stock that may be issued in the future
pursuant to a services agreement that provides for termination in
certain circumstances, 10,000 shares owned outright and 20,000 shares
that may purchased pursuant to stock options, which are currently
exercisable.
(12) Includes 10,000 shares owned outright
(13) Includes 25,000 shares that may purchased pursuant to stock options,
which are currently exercisable. (14) Includes 42,500 shares that may
purchased pursuant to stock options, which are currently exercisable.
(15) Includes 28,500 shares that may purchased pursuant to stock options,
which are currently exercisable.
(16) Includes 20,000 shares that may purchased pursuant to stock options,
which are currently exercisable.
(17) Includes 13,000 shares that may purchased pursuant to stock options,
which are currently exercisable.
PLAN OF DISTRIBUTION
The shares covered by this Prospectus are being sold for the account of the
Selling Stockholders. Such shares may be offered for sale from time to time at
market prices prevailing at the time of sale or at negotiated prices, and
without payment of any underwriting discounts or commissions except for the
usual and customary selling commissions paid to brokers or dealers. The shares
covered by this Prospectus may be offered for sale on the over-the-counter
market, or, if in the future the Common Stock should be listed on a national
exchange, then on such national exchange.
Under the Exchange Act and the regulations thereto, any person engaged in a
distribution of the shares covered by this Prospectus may not simultaneously
engage in market making activities with respect to the Common Stock during the
applicable "cooling off" periods prior to the commencement of such distribution.
In addition, and without limiting the foregoing, the Selling Stockholders will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of Common Stock by
the Selling Stockholders.
DESCRIPTION OF CAPITAL STOCK
Capital Stock.
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, $.01 par value per share and 10,000,000 shares of Preferred Stock,
$.01 par value per share.
Common Stock.
The authorized Common Stock of the Company consists of 50,000,000 shares,
par value $0.01 per share. After taking into consideration the issuance of
certain of the shares being registered, approximately 9,373,135 shares of Common
Stock will be issued and outstanding. All of the shares of Common Stock are
validly issued, fully paid and nonassessable. Holders of record of Common Stock
will be entitled to receive dividends when and if declared by the Board of
Directors out of funds of the Company legally available therefor. In the event
of any liquidation, dissolution or winding up of the affairs of the Company,
whether voluntary or otherwise, after payment of provision for payment of the
debts and other liabilities of the Company, including the liquidation preference
of all classes of preferred stock of the Company, each holder of Common Stock
will be entitled to receive his pro rata portion of the remaining net assets of
the Company, if any. Each share of Common stock has one vote, and there are no
preemptive, subscription, conversion or redemption rights. Shares of Common
Stock do not have cumulative voting rights, which means that the holders of a
majority of the shares voting for the election of directors can elect all of the
directors.
Preferred Stock.
The Company's Certificate of Incorporation authorizes the issuance of up to
10,000,000 shares of the Company's $0.01 par value preferred stock (the
"Preferred Stock"). As of the date of this Prospectus, no shares of Preferred
Stock were outstanding. The Preferred Stock constitutes what is commonly
referred to as "blank check" preferred stock. "Blank check" preferred stock
allows the Board of Directors, from time to time, to divide the Preferred Stock
into series, to designate each series, to issue shares of any series, and to fix
and determine separately for each series any one or more of the following
relative rights and preferences: (i) the rate of dividends; (ii) the price at
and the terms and conditions on which shares may be redeemed; (iii) the amount
payable upon shares in the event of involuntary liquidation; (iv) the amount
payable upon shares in the event of voluntary liquidation; (v) sinking fund
provisions for the redemption or purchase of shares; (vi) the terms and
conditions pursuant to which shares may be converted if the shares of any series
are issued with the privilege of conversion; and (vii) voting rights. Dividends
on shares of Preferred Stock, when and as declared by the Board of Directors out
of any funds legally available therefor, may be cumulative and may have a
preference over Common Stock as to the payment of such dividends. The provisions
of a particular series, as designated by the Board of Directors, may include
restrictions on the ability of the Company to purchase shares of Common Stock or
to redeem a particular series of Preferred Stock. Depending upon the voting
rights granted to any series of Preferred Stock, issuance thereof could result
in a reduction in the power of the holders of Common Stock. In the event of any
dissolution, liquidation or winding up of the Company, whether voluntary or
involuntary, the holders of each series of the then outstanding Preferred Stock
may be entitled to receive, prior to the distribution of any assets or funds to
the holders of the Common Stock, a liquidation preference established by the
Board of Directors, together with all accumulated and unpaid dividends.
Depending upon the consideration paid for Preferred Stock, the liquidation
preference of Preferred Stock and other matters, the issuance of Preferred Stock
could result in a reduction in the assets available for distribution to the
holders of the Common Stock in the event of liquidation of the Company. Holders
of Preferred Stock will not have preemptive rights to acquire any additional
securities issued by the Company. Once a series has been designated and shares
of the series are outstanding, the rights of holders of that series may not be
modified adversely except by a vote of at least a majority of the outstanding
shares constituting such series.
One of the effects of the existence of authorized but unissued shares of
Common Stock or Preferred Stock may be to enable the Board of Directors of the
Company to render it more difficult or to discourage an attempt to obtain
control of the Company by means of a merger, tender offer at a control premium
price, proxy contest or otherwise and thereby protect the continuity of or
entrench the Company's management, which concomitantly may have a potentially
adverse effect on the market price of the Common Stock. If in the due exercise
of its fiduciary obligations, for example, the Board of Directors were to
determine that a takeover proposal were not in the best interests of the
Company, such shares could be issued by he Board of Directors without
stockholder approval in one or more private placements or other transactions
that might prevent or render more difficult or make more costly the completion
of any attempted takeover transaction by diluting voting or other rights of the
proposed acquirer or insurgent stockholder group, by creating a substantial
voting block in institutional or other hands that might support the position of
the incumbent Board of Directors, by effecting an acquisition that might
complicate or preclude the takeover, or otherwise.
Delaware Legislation.
The Company is a Delaware corporation and consequently is subject to
certain anti-takeover provisions of the Delaware General Corporation Law (the
"Delaware Law"). The business combination provision contained in Section 203 of
the Delaware Law ("Section 203") defines an interested stockholder of a
corporation as any person that (i) owns, directly or indirectly, or has the
right to acquire, fifteen percent (15%) or more of the outstanding voting stock
of the corporation or (ii) is an affiliate or associate of the corporation and
was the owner of fifteen percent (15%) or more of the outstanding voting stock
of the corporation at any time within the three-year period immediately prior to
the date on which it is sought to be determined whether such person is an
interested stockholder; and the affiliates and the associates of such person.
Under Section 203, a Delaware corporation may not engage in any business
combination with any interested stockholder for a period of three years
following the date such stockholder became an interested stockholder, unless (i)
prior to such date the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, or (ii) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at lease eighty-five percent (85%) of the voting
stock of the corporation outstanding at the time the transaction commenced
(excluding, for determining the number of shares outstanding, (a) shares owned
by persons who are directors and officers and (b) employee stock plans, in
certain instances), or (iii) on or subsequent to such date the business
combination is approved by the board of directors and authorized at an annual or
special meeting of the stockholders by at least sixty-six and two-thirds percent
(66 2/3%) of the outstanding voting stock that is not owned by the interested
stockholder. The restrictions imposed by Section 203 will not apply to a
corporation if (i) the corporation's original certificate of incorporation
contains a provision expressly electing not be governed by this section or (ii)
the corporation, by the action of its stockholders holding a majority of
outstanding stock, adopts an amendment to its certificate of incorporation or
by-laws expressly electing not be governed by Section 203 (such amendment will
not be effective until 12 months after adoption and shall not apply to any
business combination between such corporation and any person who became an
interested stockholder of such corporation on or prior to such adoption). The
Company has not elected out of Section 203, and the restrictions imposed by
Section 203 apply to the Company. Section 203 could, under certain
circumstances, make it more difficult for a third party to gain control of the
Company.
Shares Eligible for Future Sale.
Sales of a substantial amount of Common Stock in the public market, or the
perception that such sales may occur, could adversely affect the market price of
the Common Stock prevailing from time to time in the public market and could
impair the Company's ability to raise additional capital through the sale of its
equity securities in the future. After taking into consideration the issuance of
certain of the shares being registered, approximately 9,373,135 shares of Common
Stock will be issued and outstanding, approximately 6,420,000 of which are
believed to be "restricted" or "control" shares for purposes of the Act.
"Restricted" shares are those acquired from the Company or an "affiliate" other
than in a public offering, while "control" shares are those held by affiliates
of the Company regardless as to how they were acquired. Nearly all of these
restricted and control shares of Common Stock are now eligible for sale under
Rule 144 subject to the volume limitations of Rule 144. In general, under Rule
144, one year must have elapsed since the later of the date of acquisition of
restricted shares from the Company or any affiliate of the Company. No time
needs to have lapsed in order to sell control shares. Once the restricted or
control shares may be sold under Rule 144, the holder is entitled to sell within
any three-month period such number of restricted or control shares that does not
exceed the greater of 1% of the then outstanding shares or the average weekly
trading volume of shares during the four calendar weeks preceding the date on
which notice of the sale is filed with the Commission. Sales under Rule 144 are
also subject to certain restrictions on the manner of selling, notice
requirements and the availability of current public information about the
Company. Under Rule 144, if two years have elapsed since the holder acquired
restricted shares from the Company or from any affiliate of the Company, and the
holder is deemed not to have been an affiliate of the Company at any time during
the 90 days preceding a sale, such person will be entitled to sell such Common
Stock in the public market under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information requirements or
notice requirements.
<PAGE>
EXPERTS
The financial statements and schedules of JVWeb, Inc. as of June 30, 1998
and for the period from October 28, 1997 (inception) through June 30, 1998 have
been included herein and in the registration statement in reliance upon the
report of Malone & Bailey, PLLC, independent certified public accountants,
included herein, and upon the authority of said firm as experts in accounting
and auditing.
<PAGE>
JVWEB INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Period ended June 30, 1998: Page
<S> <C>
Independent Auditor's Report....................................................................................F-1
Balance Sheets as of June 30, 1998 .............................................................................F-2
Statement of Expenses for the period from October 28, 1997 (date of inception) through
June 30, 1998 .........................................................................................F-3
Statement of Stockholders' Equity for the period from October 28, 1997 (date of
inception) through June 30, 1998 ......................................................................F-4
Statement of Cash Flows for the period form October 28, 1997 (date of inception) through
June 30, 1998 .........................................................................................F-5
Notes to Financial Statements ..................................................................................F-6
Three months ended December 31, 1998:
Balance sheet as of December 31, 1998 G-1
Income statements for the three and six months ended December
31, 1998 and period from October 28, 1997 (Date of Inception)
through December 31, 1997 and from October 28, 1997 (Date of
Inception) to December 31, 1998 G-2
Statement of stockholders' equity for the period from October
28, 1997 (Date of Inception) through December 31, 1998 G-3
Statements of cash flows for the nine months ended December
30, 1998 and period from October 28, 1997 (Date of
Inception) through December 31, 1997 and period from
October 28, 1997 (Date of Inception) to December
31, 1998 G-4
Notes to financial statements G-5
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
JVWeb, Inc.
Houston, Texas
We have audited the accompanying balance sheet of JVWeb, Inc., a Delaware
corporation, as of June 30, 1998, and the related statements of expenses,
stockholders' equity, and cash flows for the period from inception (October 28,
1998) to June 30, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of JVWeb, Inc., as of June 30,
1998, and the results of its operations and its cash flows for the initial
period then ended in conformity with generally accepted accounting principles.
MALONE & BAILEY
Houston, Texas
September 10, 1998
<PAGE>
JV WEB, INC.
(A Development Stage Company)
Balance Sheet
As of June 30, 1998
ASSETS
Cash
$ 412
Employee advance 2,550
Inventory 5,305
Prepaid legal expenses 19,500
27,767
Office equipment and furniture
(net of $530 accumulated depreciation) 3,860
Deposit on purchase of subsidiary 25,000
TOTAL ASSETS $ 56,627
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,481
Notes payable - founding shareholder 38,000
Note payable - other 1,250
--------
TOTAL CURRENT LIABILITIES 46,731
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par, 10,000,000
shares authorized, no shares issued
or outstanding -
Common stock, $.01 par, 50,000,000
shares authorized, 7,170,100 shares
issued and outstanding 71,700
Paid in capital 112,816
Accumulated deficit during the
development stage (174,620)
Total stockholders' equity 9,896
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 56,627
========
See notes to financial statements.
F-2
<PAGE>
JV WEB, INC.
(A Development Stage Company)
Income Statements
Period from October 28, 1997 (Date of Inception)
Through June 30, 1998
REVENUES $ 190
COST OF SALES 48
---------
Gross Margin 142
EXPENSES
General and administrative 174,338
Depreciation 530
Operating (Loss) (174,726)
INTEREST INCOME 106
Net deficit accumulated during the development stage $ (174,620)
===========
Net loss per common share ($.02)
Weighted average common shares outstanding 6,681,250
See notes to financial statements.
F-3
<PAGE>
JV WEB, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
Period from October 28, 1997 (Date of Inception)
Through June 30, 1998
<TABLE>
<CAPTION>
Accumulated
Deficit
During the
Common Stock Paid in Development
Shares Amount Capital Stage Totals
<S> <C> <C> <C> <C> <C>
Shares issued at
inception to
founding
shareholder,
for cash 6,200,000 $62,000 $ 7,516 $ 69,516
Shares issued for:
Cash 700,000 7,000 48,000 55,000
Services 200,000 2,000 58,000 60,000
Shares issued as a
deposit on purchase
of subsidiary 70,000 700 129,300 130,000
Returnable shares (130,000) (130,000)
Net deficit $(174,620) (174,620)
--------- -------- -------- --------- ---------
Balances, June 30, 1998 7,170,000 $71,170 $112,816 $(174,620) $ 9,896
========= ======= ======== ============ =======
</TABLE>
See notes to financial statements.
F-4
<PAGE>
JV WEB, INC.
(A Development Stage Company)
Statements of Cash Flows
Period from October 28, 1997 (Date of Inception)
Through June 30, 1998
CASH FLOWS FROM OPERATIONS
Net deficit $(174,620)
Adjustments to reconcile net deficit
to cash provided from operating
activities
Depreciation 530
Common stock issued for services 60,000
Increase in employee advance ( 2,550)
Increase in inventory ( 5,305)
Increase in prepaid legal expense ( 19,500)
Increase in accounts payable 7,481
--------
NET CASH USED BY OPERATING ACTIVITIES (133,964)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment and furniture ( 4,390)
Deposit on purchase of subsidiary ( 25,000)
---------
NET CASH USED BY INVESTING ACTIVITIES ( 29,390)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable to founding shareholder 38,000
Note payable - other 1,250
Issuance of common stock 124,516
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 163,766
---------
NET INCREASE IN CASH 412
CASH ON JUNE 30, 1998 412
=========
See notes to financial statements.
F-5
<PAGE>
JV WEB, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations. JVWeb, Inc. ("Company") was formed October 28, 1997 as a
Delaware corporation. The Company was formed to market and develop internet
sites as commercial sales outlets.
Use of estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that could affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Cash and cash equivalents. For purposes of the cash flow statement, the Company
considers highly liquid investments with maturities less than 90 days as cash
and cash equivalents.
Inventories consist of imprinted sportswear and ad-specialty items. Inventories
are stated at the lower of cost, determined on the first-in, first-out (FIFO)
method, or market.
Office equipment and furniture are valued at cost. Maintenance and repair costs
are charged to expense as incurred. Gains and losses on disposition of property
and equipment are reflected in income. Depreciation is computed on the
straight-line method for financial reporting purposes, based on estimated useful
lives of 3 to 5 years.
Revenue and cost recognition. Revenue from merchandise sales are recognized when
the merchandise is sold. All merchandise is sold over the internet using credit
card payments. Advertising costs are expensed as incurred.
Income taxes. Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to depreciation differences.
NOTE B - DEVELOPMENT STAGE OPERATIONS AND RELATED PARTY TRANSACTIONS
The founding shareholder contributed $69,516 cash for the initial common stock
issued. The founding shareholder also loaned the Company $23,000 individually
and $15,000 from a related company, both of which are due upon demand and accrue
interest at 6%.
The Company entered into a three-year employment agreement with the founding
shareholder in October 1997 which named him President of the Company and
provided an annual salary of $60,000. The Company has not paid any wages to
date.
In October 1997, the Company granted 2,000,000 stock options to purchase the
Company's common stock at $0.10 per share to the founding shareholder. The
options may be exercised at any time and expire in five years.
F-6
<PAGE>
NOTE C - PREPAID LEGAL EXPENSE
In early May, 1998, the Company issued 20,000 common stock options at their
estimated fair market value of $0.25 per share to its attorney for services
rendered. In late June 1998, the Company issued 50,000 shares to the same
attorney. These shares are valued at their estimated fair market value of $0.75
per share. As of June 30, 1998, $18,000 has been recorded as legal expense with
the remainder of $19,500 shown as prepaid legal expense.
NOTE D - NOTE PAYABLE
The Company borrowed $1,250 from a former consultant. The loan is due upon
demand and interest accrues at 6%.
NOTE E - OPERATING LEASES
The Company is obligated on a corporate office lease in Houston, Texas and on an
electronic web site lease in Arizona on a month-to-month basis for a total of
$1,500 per month.
NOTE F - CONSULTING AGREEMENTS
The Company has entered into two consulting agreements by which 250,000 options
to purchase the Company's common stock at $0.25 per share have been issued, and
a variable monthly cash retainer is paid. The options are subject to forfeiture
on a prorata basis should the services terminate prior to the term of the
agreement.
The Company has entered into four consulting agreements by which options to
purchase the Company's common stock at prices approximating fair market value on
the date of the grant are issued at a rate of 100 shares per hour. As of June
30, 1998, 105,250 options have been granted under these agreements.
The Company has entered into another consulting agreement which it canceled in
August, 1998. The Company issued 50,000 shares as compensation under this
agreement, and does not believe it is liable for any additional amounts.
NOTE G - STOCK OPTIONS
As permitted under Statement of Financial Accounting Standards (SFAS) No. 123
(Accounting for Stock-Based Compensation), the Company has continued to apply
Accounting Principles Board (APB) No. 25 (Accounting for Stock Issued to
Employees) and related interpretations. Accordingly, no compensation expense has
been recognized for the stock options. The Company has granted options pursuant
to its stock option plan. Grants are made at management's discretion, and are
compensation for services. As of June 30, 1998, a total of 4,041,250 options
were outstanding and exercisable with the following exercise prices:
2,233,250 at $0.10
1,500,000 at 1.00
308,000 at 0.25
Outstanding options expire in 5 years from the date of grant, and are
exercisable at date of grant.
F-7
<PAGE>
NOTE H - FINANCING
As of September 10, 1998, the Company has not achieved significant sales volume.
Only temporary equity financing has been secured to date.
NOTE I - SUBSEQUENT EVENTS
The Company entered into an Asset Purchase Agreement in July, 1998 with Time
Lending Services, Inc. to purchase all of the assets of a publication called
"Wall Street Whispers." The purchase price of the publication is $140,000. The
Company has paid $45,000 ($25,00 at June 30, 1998) in cash, and issued 70,000
shares of the Company's common stock on June 29, 1998. The balance of the
purchase price, $95,000, is due by October 15, 1998. Any proceeds realized from
the sale of the common stock by the seller will be deducted from the balance
due, and any shares not sold will be returned to the Company once the balance
due has been paid in full.
The Company received $50,000 in August, 1998 from Equitrust Mortgage Corporation
("Equitrust") pursuant to an agreement dated August 3, 1998 which states if the
Company files a registration statement (SB2) within 90 days from the date of the
loan, the note will automatically convert into 250,000 shares of the Company's
common stock. Further, upon registration, Equitrust will purchase another
200,000 shares for $50,000. The Company received a $5,000 deposit on this
transaction in August, 1998. Further, Equitrust has an option to purchase an
additional 100,000 shares of common stock for $25,000.
The Company entered into two consulting agreements in July, 1998. The term of
both agreements is six months, and 75,000 shares will be issued as payment for
the consulting agreement.
The Company entered into two consulting agreements in August, 1998. The term of
both agreements is one year, and 101,900 shares will be issued in monthly
installments as payment for the consulting agreement.
In August, 1998, the Company agreed to issue an additional 45,060 shares of its
common stock to an existing corporate shareholder with additional compensation.
The shareholder had distributed shares of the Company to its shareholders as a
dividend, which resulted in short positions which the Company agreed to cover.
<PAGE>
JVWeb, Inc.
(A Development Stage Company)
Balance Sheet
As of December 31, 1998
Unaudited
ASSETS
Cash $ 505
Inventory 8,946
Prepaid legal expenses 4,300
Total Current Assets 13,751
Office equipment and furniture (net of $969
accumulated depreciation) 3,421
Total Assets $ 17,172
=========
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable $ 19,437
Notes payable to related parties 102,500
---------
Total Liabilities 121,937
Preferred stock, $0.01 par, 10,000,000
shares authorized, no shares issued or
outstanding -
Common stock, $0.01 par, 50,000,000 shares
authorized, 7,974,160 shares issued and
outstanding 79,742
Paid-in capital 295,595
Accumulated deficit during
the development stage (480,102)
Total Stockholders' Equity (104,765)
Total Liabilities & Stockholders' Equity $ 17,172
=========
See notes to financial statements
G-1
<PAGE>
JVWeb, Inc.
(A Development Stage Company)
Income Statements
For the Three and Six Months Ended
December 31, 1998, October 28, 1997 (Date
of Inception) to December 31, 1997,
and the Period From October 28, 1997 (Date of Inception)
to December 31, 1998
Unaudited
<TABLE>
<CAPTION>
3 Months 6 Months Inception Inception
Ended Ended Through Through
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1998 1997 1998
<S> <C> <C> <C> <C>
REVENUES $ 167 $ 190
COST OF SALES 48
Gross Margin 167 142
EXPENSES
General & administrative $ 125,762 $ 305,043 42,828 479,381
Depreciation 244 439 969
--------- --------- ---------- ---------
126,006 305,482 42,828 480,350
--------- --------- ---------- ---------
Operating (Loss) (126,006) (305,482) ( 42,661) (480,208)
INTEREST INCOME
106
Net deficit accumulated
during the development
stage $(126,006) $(305,482) $( 42,661) $(480,102)
========= ========= ========== =========
NET LOSS PER COMMON SHARE $( .02) $( .04) $( .01) $( .07)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 7,894,160 7,497,080 6,200,000 6,968,832
</TABLE>
See notes to financial statements
G-2
<PAGE>
JVWeb, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
Period from October 28, 1997 (Date of Inception)
Through December 31, 1998
<TABLE>
<CAPTION>
Accumulated
Deficit
During the
Common Stock Paid-in Development
Shares Amount Capital Stage Totals
<S> <C> <C> <C> <C> <C>
Shares issued at
inception to founding
shareholder for cash 6,200,000 $ 62,000 $ 7,516 $ 69,516
Shares issued:
for cash 700,000 7,000 48,000 55,000
for services 200,000 2,000 58,000 60,000
deposit on purchase
of subsidiary 70,000 700 129,300 130,000
Returnable shares (130,000) (130,000)
Net (deficit) $(174,620) (174,620)
Balances, June 30,
1998 (Audited) 7,170,000 71,700 112,816 (174,620) 9,896
---------- --------- --------- --------- ---------
Shares issued:
for cash 620,240 6,202 116,976 123,178
for services 358,860 3,589 66,454 70,043
Shares returned from
subsidiary purchase
deposit ( 70,000) ( 700) 700
Fractional shares issued 45,060 451 ( 451)
Shares repurchased from
founding shareholder ( 150,000) ( 1,500) ( 900) ( 2,400)
Net deficit (305,482) (305,482)
--------- --------- -------- --------- --------
Balance, December 31,
1998 (Unaudited) 7,974,160 $ 79,742 $ 295,595 $(480,102) $(104,765)
========== ========= ========= ========= =========
</TABLE>
See notes to financial statements
G-3
<PAGE>
JVWeb, Inc.
(A Development Stage Company)
Statements of Cash Flows
For the Six Months Ended December 31, 1998,
Periodfrom October 28, 1997(Date of
Inception)to December 31, 1997, and the
period from October 28, 1997 (Date of
Inception)
to December 31, 1998
Unaudited
<TABLE>
<CAPTION>
6 Months Inception Inception
Ended Through Through
December 31, December 31, December 31,
1998 1997 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net deficit $( 305,482) $( 42,661) $( 480,102)
Adjustments to reconcile net
deficit to cash provided
from operating activities
Depreciation 439 969
Common stock issued for
services 70,043 130,043
Write off of deposits on
purchase of subsidiary 55,000 55,000
Net changes in:
Employee advance 2,550
Inventory ( 3,641) ( 8,946)
Prepaid legal expenses 15,200 ( 4,300)
Accounts payable 11,956 19,437
---------- ----------
NET CASH USED BY OPERATING
ACTIVITIES ( 153,935) ( 42,661) ( 287,899)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of office equipment
and furniture ( 4,390)
Deposit on purchase of subsidiary ( 30,000) ( 55,000)
---------- ----------- ----------
NET CASH USED BY INVESTING
ACTIVITIES ( 30,000) ( 59,390)
---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable to founding
shareholder 64,500 833 102,500
Reduction of note payable ( 1,250)
Issuance of common stock 120,778 69,516 245,294
---------- ----------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 184,028 70,349 347,794
---------- ----------- ----------
NET INCREASE (DECREASE) IN CASH 93 28,688 505
CASH BEGINNING 412
---------- ----------- ----------
CASH ENDING $ 505 $ 28,688 $ 505
========== =========== ==========
</TABLE>
See notes to financial statements
G-4
<PAGE>
JVWeb, Inc.
NOTES TO FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of JVWeb, Inc., a Texas
corporation ("Company"), have been prepared in accordance with generally
accepted accounting principles and the rules of the Securities and Exchange
Commission ("SEC"), and should be read in conjunction with the audited financial
statements and notes thereto contained in the Company's latest Annual Report
filed with the SEC on From 10-KSB. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for the interim
periods presented have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the full year. Notes to the financial statements which would substantially
duplicate the disclosure contained in the audited financial statements for the
most recent fiscal year ended June 30, 1998, as reported in Form 10-KSB, have
been omitted.
NOTE B - DEPOSIT FORFEITURE
The Company entered into an agreement on July 31, 1998 to acquire a financial
publication known as "Wall Street Whispers" from Time Financial Services, Inc.
("Seller") for $140,000. As of December 31, 1998 $55,000 had been paid for this
purchase. Due to stock market volatility and Company concerns about overall
financing, the Company agreed to terminate the purchase obligation, and Seller
was permitted to retain the $55,000. Consequently, the Company has recorded a
loss on this acquisition attempt.
NOTE C - CONSULTING AGREEMENT
The Company entered into an agreement with a consultant on October 1, 1998. The
Company agreed to issue 120,000 options at $0.50 per share as compensation for 2
years of consulting services.
NOTE D - STOCK OPTIONS
As permitted under Statement of Financial Accounting Standards (ASFAS) No. 123
(Accounting for Stock-Based Compensation), the Company has continued to apply
Accounting Principles Board (AAPB) Opinion No. 25 (Accounting for Stock Issued
to Employees) and related interpretations. Accordingly, no compensation expense
has
G-5
<PAGE>
JVWeb, Inc.
NOTES TO FINANCIAL STATEMENTS
NOTE D - STOCK OPTIONS (Continued)
been recognized for the stock options. The Company has granted options pursuant
to its stock option plan. Grants are made at management's discretion, and are
compensation for services. At December 31, 1998 a total of 4,161,250 options
were outstanding and exercisable with the following exercise prices:
3,756,250 at $0.10
285,000 at $0.25
120,000 at $0.50
Options that have been granted and are outstanding expire in 5 years from date
of grant, and are 100% exercisable at date of grant.
G-6
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
RISK FACTORS .................................................................................................. 2
USE OF PROCEEDS ................................................................................................13
DIVIDEND POLICY ................................................................................................13
PRICE RANGE OF COMMON STOCK ....................................................................................13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ...................................................................13
BUSINESS .......................................................................................................15
MANAGEMENT .....................................................................................................27
EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS ................................................................28
DETERMINATION OF OFFERING PRICE.................................................................................30
PRINCIPAL STOCKHOLDERS .........................................................................................31
SELLING STOCKHOLDERS ...........................................................................................32
PLAN OF DISTRIBUTION ...........................................................................................33
DESCRIPTION OF CAPITAL STOCK ...................................................................................33
EXPERTS ........................................................................................................36
</TABLE>
UNTIL ___________________ _____, 1999, ALL DEALERS EFFECTING TRANSACTIONS
IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides that, to the fullest
extent authorized by the Delaware Law, the Company shall indemnify each person
who was or is made a party or is threatened to be made a party to or is involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding") because he is or was a director or officer of the
Company, or is or was serving at the request of the Company as a director,
officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against all expenses, liabilities and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) actually and reasonably incurred
or suffered by him in connection with such Proceeding.
Under Section 145 of the Delaware Law, a corporation may indemnify a
director, officer, employee or agent of the corporation against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any threatened,
pending or completed Proceeding (other than an action by or in the right of the
corporation) if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. In the case of an action brought by or in the
right of the corporation, the corporation may indemnify a director, officer,
employee or agent of the corporation against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of any threatened, pending or completed action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that a
court determines upon application that, in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
The Company's Certificate of Incorporation also provides that expenses
incurred by a person in his capacity as director of the Company in defending a
Proceeding may be paid by the Company in advance of the final disposition of
such Proceeding as authorized by the Board of Directors of the Company in
advance of the final disposition of such Proceeding as authorized by the Board
of Directors of the Company upon receipt of an undertaking by or on behalf of
such person to repay such amounts unless it is ultimately determined that such
person is entitled to be indemnified by the Company pursuant to the Delaware
Law. Under Section 145 of the Delaware Law, a corporation must indemnify a
director, officer, employee or agent of the corporation against expenses
(including attorneys' fees) actually and reasonably incurred in by him in
connection with the defense of a Proceeding if he has been successful on the
merits or otherwise in the defense thereof.
The Company's Certificate of Incorporation provides that a director of the
Company shall not be personally liable to the Company of its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for breach of a director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware Law for the willful or negligent unlawful payment of dividends,
stock purchase or stock redemption or (iv) for any transaction from which a
director derived an improper personal benefit.
The Company intends to attempt to procure directors' and officers'
liability insurance which insures against liabilities that directors and
officers of the Company may incur in such capacities.
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND OFFERING. The estimated expenses set
forth below, will be borne by the Company.
<TABLE>
<CAPTION>
Item Amount
<S> <C>
SEC Registration Fee .................................................................................$137
Legal Fees and Expense .............................................................................$7,500
Accounting Fees and Expenses .........................................................................$500
Printing ...........................................................................................$1,000
Total ..............................................................................................$9,137
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the formation of the Company, the Company issued to Greg
J. Micek, a director and the President of the Company, 6.2 million shares of the
Company's common stock (the "Common Stock"), in consideration of $62,000.
Moreover, pursuant to an agreement between the Company and Mr. Micek, the
Company granted to Mr. Micek options to purchase 2,000,000 shares of Common
Stock at a per-share purchase price of $.10. The options have a term of five
years. Because Mr. Micek is a director and President of the Company, the
issuance of Common Stock and the options is claimed, and the issuances of the
Common Stock underlying the option will be claimed, to be exempt pursuant to
Section 4(2) of the Act under the Act.
As a finder's fee for making the introductions leading to the investment of
LS Capital Corporation ("LS Capital") in the Company and for a payment of $.01
per share, the Company issued to Lewis E. Ball, a director of the Company,
100,000 shares of Common Stock. In consideration of services provided to the
Company, the Company issued to Mr. Ball 20,000 shares of Common Stock. Because
Mr. Ball is a director, these issuances of Common Stock to him are claimed to be
exempt pursuant Section 4(2) of the Act.
Pursuant to an agreement between the Company and LS Capital dated November
15, 1997 (as amended), the Company issued to LS Capital 500,000 shares of Common
Stock and 1,500,000 Class A warrants, in consideration of $5,000.00. The Company
also issue to LS Capital 45,060 shares of Common Stock to settle possible claims
to additional shares of Common Stock that LS Capital may have had against the
Company. All of these issuances are claimed to be exempt pursuant to Regulation
D under the Act.
Pursuant to agreements between the Company and several important service
providers, the Company agreed to issue options to purchase shares of Common
Stock to such providers, at a purchase price per share equal to fair market
value, on any day on which the providers provide services to the Company. The
number of shares with respect to which the providers will be issued options
depends on the amount of services provided. As of March 10, 1999, these
providers had been issued options to purchase 382,250 shares of Common Stock.
The exact number of shares of Common Stock with respect to which options will be
issued to such providers can not now be determined. The issuances of the options
is claimed, and the issuances of the underlying Common Stock will be claimed, to
be exempt pursuant to Section 4(2) of the Act and Regulation D under the Act.
Pursuant to a subscription agreement, the Company issued to Universal
Warranty, Inc. 200,000 shares of Common Stock in consideration of $50,000. This
issuance is claimed to be exempt pursuant to Regulation D under the Act.
The Company issued a convertible promissory note to Equitrust Mortgage
Corporation ("Equitrust") in consideration of a loan by Equitrust to the Company
in the amount of $50,000. Subsequently, this convertible promissory note was
automatically converted into 200,000 shares of Common Stock. In this connection,
Equitrust also purchased 300,000 additional shares of Common Stock for an
aggregate purchase price of $75,000. The issuances of the convertible promissory
note, the shares of Common Stock into which it was converted, and the 300,000
additional shares of Common Stock are claimed to be exempt pursuant to
Regulation D under the Act.
For services rendered (and agreed to be rendered in written contracts)
having a value determined to be $132,675, the Company issued to four persons
providing services to the Company an aggregate of 176,900 shares of Common
Stock. This issuance is claimed to be exempt pursuant to Regulation D under the
Act.
The Company has also issued to seven persons providing various services to
the Company options to purchase an aggregate of 176,000 shares of Common Stock
at per-share exercise prices ranging from $.10 to $.25. The issuances of the
options are claimed, and the issuances of the underlying Common Stock will be
claimed, to be exempt pursuant to Regulation D under the Act.
In consideration of the release of amounts actually or possibly owed by the
Company to an individual, the Company issued to such individual 20,000 shares of
Common Stock. This issuance is claimed to be exempt pursuant to Regulation D
under the Act.
For services rendered (and agreed to be rendered in a written contract)
having a value determined to be $65,000, the Company has agreed to issue to a
person providing services to the Company an aggregate of 60,000 shares of Common
Stock outright and up to 200,000 shares of Common Stock upon the occurrence of
certain stipulated events. Moreover, the Company granted to this service
provider options to purchase 430,000 shares of Common Stock at per-share
purchase prices of $.25 (for 130,000 of the optioned shares), $.50 (for 100,000
of the optioned shares), $.75 (for 100,000 of the optioned shares) and $1.00
(for 100,000 of the optioned shares). The issuances of Common Stock and the
options are claimed, and the issuances of the Common Stock underlying the
options will be claimed, to be exempt pursuant to Regulation D under the Act.
ITEM 27. EXHIBITS
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
3.01 Certificate of Incorporation of the Company is incorporated herein by reference from the
Company's Registration Statement on Form SB-2 (SEC File No. 333-41635) filed December
29, 1997, Item 27, Exhibit 3.01.
3.02 Bylaws of the Company is incorporated herein by reference from the Company's
Registration Statement on Form SB-2 (SEC File No. 333-41635) filed December 29, 1997,
Item 27, Exhibit 3.02.
4.01 Specimen Common Stock Certificate is incorporated herein by reference from the Company's
Registration Statement on Form SB-2 (SEC File No. 333-41635) filed December 29, 1997,
Item 27, Exhibit 4.01.
4.02 Warrant Agreement dated December 15, 1997 between the Company and American Stock Transfer &
Trust Company is incorporated herein by reference from the Company's Registration
Statement on Form SB-2 (SEC File No. 333-41635) filed December 29, 1997, Item 27,
Exhibit 4.02.
4.03 First Amendment to Agreement dated March 31, 1998 between the
Company and American Stock Transfer Company & Trust Company is
incorporated herein by reference from Amendment No. 2 to the
Company's Registration Statement on Form SB-2/A (SEC File No.
333-41635) filed April 21, 1998, Item 27, Exhibit 4.03.
4.04 Second Amendment to Agreement dated April, 1998 between the Company and American Stock
Transfer Company & Trust Company.
5.01 Opinion and Consent of Randall W. Heinrich, Of Counsel to Gillis & Slogar, as to the
legality of securities being registered.
10.01 Agreement dated November 15, 1997 between the Company and LS Capital Corporation is
incorporated herein by reference from the Company's Registration Statement on Form
SB-2 (SEC File No. 333-41635) filed December 29, 1997, Item 27, Exhibit 10.01.
10.02 Employment Agreement dated December 1, 1997 by and between the Company and Greg J.
Micek is incorporated herein by reference from the Company's Registration Statement on
Form SB-2 (SEC File No. 333-41635) filed December 29, 1997, Item 27, Exhibit 10.02.
10.03 Stock Option Agreement dated December 1, 1997 executed by the
Company in favor of Greg J. Micek is incorporated herein by
reference from Amendment No. 1 to the Company's Registration
Statement on Form SB-2/A (SEC File No. 333-41635) filed
February 27, 1998, Item 27, Exhibit 10.03.
10.04 Stock Option Agreement dated December 17, 1997 executed by the Company in favor of
Dudley R. Anderson is incorporated herein by reference from Amendment No. 1 to the
Company's Registration Statement on Form SB-2/A (SEC File No. 333-41635) filed
February 27, 1998, Item 27, Exhibit 10.04.
10.05 Stock Option Agreement dated December 1, 1997 executed by the
Company in favor of Kevin Dotson is incorporated herein by
reference from Amendment No. 1 to the Company's Registration
Statement on Form SB-2/A (SEC File No. 333-41635) filed
February 27, 1998, Item 27, Exhibit 10.05.
10.06 Stock Option Agreement dated December 1, 1997 executed by the
Company in favor of G-2 Advertising is incorporated herein by
reference from Amendment No. 1 to the Company's Registration
Statement on Form SB-2/A (SEC File No. 333-41635) filed
February 27, 1998, Item 27, Exhibit 10.06.
10.07 First Amendment dated April 14, 1998 to Agreement dated
November 15, 1997 between the Company and LS Capital
Corporation is incorporated herein by reference from Amendment
No. 2 to the Company's Registration Statement on Form SB-2/A
(SEC File No. 333-41635) filed April 21, 1998, Item 27,
Exhibit 10.07.
10.08 Agreement dated April 20, 1998 between the Company and LS Capital Corporation is
incorporated herein by reference from Amendment No. 2 to the Company's Registration
Statement on Form SB-2/A (SEC File No. 333-41635) filed April 21, 1998, Item 27,
Exhibit 10.08.
10.09 Asset Purchase Agreement dated July 31, 1998 by and among
Market Data Corporation and Time Financial Services, Inc. (as
sellers) and the Company (as purchaser) is incorporated herein
by reference from the Company's (SEC File No. 0-24001) Current
Report on Form 8-K dated July 31, 1998, Item 7(c), Exhibit
10.01.
10.10 Agreement dated August 3, 1998 by and between Equitrust Mortgage Corporation and the
Company is incorporated herein by reference from the Company's Current Report on Form
8-K dated July 31, 1998 (SEC File No. 0-24001), Item 7(c), Exhibit 10.02.
10.11 Promissory Note dated August 3, 1998 in the original principal
amount of $50,000 made payable by the Company to the order of
Equitrust Mortgage Corporation is incorporated herein by
reference from the Company's Current Report on Form 8-K dated
July 31, 1998 (SEC File No. 0-24001), Item 7(c), Exhibit
10.02.
10.12 Consulting Services Agreement dated February 15, 1999 by and between the Company and
Tanye Capital Corp.
21.01 Subsidiaries of Registrant
23.01 Consent of Malone & Bailey, PLLC
23.02 Consent of Randall W. Heinrich, Of Counsel to Gillis & Slogar, contained in Exhibit
5.01.
25.1 Power of Attorney (included on the signature page thereto)
99.01 The Company's 1998 Consultant Compensation Plan is incorporated herein by reference
from the Company's Registration Statement on Form S-8 (SEC File No. 333-55979) filed
June 3, 1998, Item 8, Exhibit 4.2.
</TABLE>
ITEM 28. UNDERTAKINGS
A. The undersigned Registrant will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to include
any prospectus required by section 10(a)(3) of the Securities Act, reflect in
the prospectus any facts or events which, individually or together, represent a
fundamental change in the information in the registration statement, and include
any additional or changed material information on the plan of distribution.
(2) For the purpose of determining any liability under the
Securities Act, treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of such securities at that
time to be the initial bona fide offering thereof.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
B. (1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
(2) In the event that a claim for indemnification against such
liabilities (other than the payment by the small business issuer of expenses
incurred or paid by a director, officer or controlling person of the small
business issuer in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the small business issuer will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirement for filing on Form SB-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas on March 12, 1999.
JVWEB INC.
By: /s/ Greg J. Micek
Greg J. Micek
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ Greg. J. Micek Director and President March 12, 1999
Greg J. Micek (Principal Executive Officer
and Principal Financial Officer)
/s/ Lewis E. Ball Director March 12, 1999
- --------------------------------
Lewis E. Ball
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
3.01 Certificate of Incorporation of the Company is incorporated herein by reference from the
Company's Registration Statement on Form SB-2 (SEC File No. 333-41635) filed December
29, 1997, Item 27, Exhibit 3.01.
3.02 Bylaws of the Company is incorporated herein by reference from the Company's
Registration Statement on Form SB-2 (SEC File No. 333-41635) filed December 29, 1997,
Item 27, Exhibit 3.02.
4.01 Specimen Common Stock Certificate is incorporated herein by reference from the Company's
Registration Statement on Form SB-2 (SEC File No. 333-41635) filed December 29, 1997,
Item 27, Exhibit 4.01.
4.02 Warrant Agreement dated December 15, 1997 between the Company and American Stock Transfer &
Trust Company is incorporated herein by reference from the Company's Registration
Statement on Form SB-2 (SEC File No. 333-41635) filed December 29, 1997, Item 27,
Exhibit 4.02.
4.03 First Amendment to Agreement dated March 31, 1998 between the
Company and American Stock Transfer Company & Trust Company is
incorporated herein by reference from Amendment No. 2 to the
Company's Registration Statement on Form SB-2/A (SEC File No.
333-41635) filed April 21, 1998, Item 27, Exhibit 4.03.
4.04 Second Amendment to Agreement dated April, 1998 between the Company and American Stock
Transfer Company & Trust Company.
5.01 Opinion and Consent of Randall W. Heinrich, Of Counsel to Gillis & Slogar, as to the
legality of securities being registered.
10.01 Agreement dated November 15, 1997 between the Company and LS Capital Corporation is
incorporated herein by reference from the Company's Registration Statement on Form
SB-2 (SEC File No. 333-41635) filed December 29, 1997, Item 27, Exhibit 10.01.
10.02 Employment Agreement dated December 1, 1997 by and between the Company and Greg J.
Micek is incorporated herein by reference from the Company's Registration Statement on
Form SB-2 (SEC File No. 333-41635) filed December 29, 1997, Item 27, Exhibit 10.02.
10.03 Stock Option Agreement dated December 1, 1997 executed by the
Company in favor of Greg J. Micek is incorporated herein by
reference from Amendment No. 1 to the Company's Registration
Statement on Form SB-2/A (SEC File No. 333-41635) filed
February 27, 1998, Item 27, Exhibit 10.03.
10.04 Stock Option Agreement dated December 17, 1997 executed by the Company in favor of
Dudley R. Anderson is incorporated herein by reference from Amendment No. 1 to the
Company's Registration Statement on Form SB-2/A (SEC File No. 333-41635) filed
February 27, 1998, Item 27, Exhibit 10.04.
10.05 Stock Option Agreement dated December 1, 1997 executed by the
Company in favor of Kevin Dotson is incorporated herein by
reference from Amendment No. 1 to the Company's Registration
Statement on Form SB-2/A (SEC File No. 333-41635) filed
February 27, 1998, Item 27, Exhibit 10.05.
10.06 Stock Option Agreement dated December 1, 1997 executed by the
Company in favor of G-2 Advertising is incorporated herein by
reference from Amendment No. 1 to the Company's Registration
Statement on Form SB-2/A (SEC File No. 333-41635) filed
February 27, 1998, Item 27, Exhibit 10.06.
10.07 First Amendment dated April 14, 1998 to Agreement dated
November 15, 1997 between the Company and LS Capital
Corporation is incorporated herein by reference from Amendment
No. 2 to the Company's Registration Statement on Form SB-2/A
(SEC File No. 333-41635) filed April 21, 1998, Item 27,
Exhibit 10.07.
10.08 Agreement dated April 20, 1998 between the Company and LS Capital Corporation is
incorporated herein by reference from Amendment No. 2 to the Company's Registration
Statement on Form SB-2/A (SEC File No. 333-41635) filed April 21, 1998, Item 27,
Exhibit 10.08.
10.09 Asset Purchase Agreement dated July 31, 1998 by and among
Market Data Corporation and Time Financial Services, Inc. (as
sellers) and the Company (as purchaser) is incorporated herein
by reference from the Company's (SEC File No. 0-24001) Current
Report on Form 8-K dated July 31, 1998, Item 7(c), Exhibit
10.01.
10.10 Agreement dated August 3, 1998 by and between Equitrust Mortgage Corporation and the
Company is incorporated herein by reference from the Company's Current Report on Form
8-K dated July 31, 1998 (SEC File No. 0-24001), Item 7(c), Exhibit 10.02.
10.11 Promissory Note dated August 3, 1998 in the original principal
amount of $50,000 made payable by the Company to the order of
Equitrust Mortgage Corporation is incorporated herein by
reference from the Company's Current Report on Form 8-K dated
July 31, 1998 (SEC File No. 0-24001), Item 7(c), Exhibit
10.02.
10.12 Consulting Services Agreement dated February 15, 1999 by and between the Company and
Tanye Capital Corp.
21.01 Subsidiaries of Registrant
23.01 Consent of Malone & Bailey, PLLC
23.02 Consent of Randall W. Heinrich, Of Counsel to Gillis & Slogar, contained in Exhibit
5.01.
25.1 Power of Attorney (included on the signature page thereto)
The Company's 1998 Consultant Compensation Plan is
incorporated herein by reference from the Company's
Registration Statement on Form S-8 (SEC File No.
333-55979) filed June 3, 1998, Item 8, Exhibit 4.2.
</TABLE>
SECOND AMENDMENT TO AGREEMENT
THIS SECOND AMENDMENT TO AGREEMENT made effective as of the 15th day of
April, 1998, between JVWEB, INC., a Delaware corporation with offices at 5444
Westheimer, Suite 2080, Houston, Texas 77056 (the "Company"), and AMERICAN STOCK
TRANSFER & TRUST COMPANY, with offices at 40 Wall Street, New York, New York
10005(the "Warrant Agent").
RECITALS:
WHEREAS, the Company and Warrant Agent entered into a warrant Agreement
dated December 15, 1997 (the "Agreement"); and
WHEREAS, the Company and Warrant Agent amended the Agreement for the
first time effective March 31, 1998; and
WHEREAS, the Company and Warrant Agent desire to amend the Agreement a
second time upon the terms, provisions and conditions set forth hereinafter;
AGREEMENT:
NOW, THEREFORE, in consideration of (a) the mutual covenants and
agreements of the Company and Warrant Agent to amend the Agreement, and (b)
other good and valuable consideration (the receipt, sufficiency and adequacy of
the consideration recited in (a) and (b) immediately preceding are hereby
acknowledged and confessed by each party hereto), the Company and Warrant Agent
hereby agree as follows (all undefined, capitalized terms used herein shall have
the meanings assigned to such terms in the Agreement):
1. Amendments to the Agreement. The Section of the Agreement captioned
"INTRODUCTION" is hereby to read in its entirety as follows:
"Introduction
The Company has determined to issue and deliver up to
1,500,000 common stock purchase warrants (the "Class A Warrants")
evidencing the right of the holders thereof to purchase an aggregate of
1,500,000 shares of common stock, $0.01 par value of the Company (the
"Common Stock"), which Class A Warrants are to be issued and delivered
as part of units (the "Units") to be registered pursuant to a
registration statement No. 333-43379 (the "Registration Statement")
filed with the Securities and Exchange Commission. In connection with
the creation of the Class A Warrants, the Company has decide to create
3,000,000 common stock purchase warrants (the "Class B Warrants")
evidencing the right of the holders thereof to purchase an aggregate of
3,000,000 shares of Common Stock, which Class B Warrants are to be
registered pursuant to the Registration Statement and which Class B
Warrants are to be issued to the holders of the Class A Warrants upon
exercise of the Class A Warrants at rate of two Class B Warrants for
each Class A Warrant exercised. In connection with the creation of the
Class B Warrants, the Company has decide to create 3,000,000 common
stock purchase warrants (the "Class C Warrants") evidencing the right
of the holders thereof to purchase an aggregate of 3,000,000 shares of
Common Stock, which Class C Warrants are to be registered pursuant to
the Registration Statement and which Class C Warrants are to be issued
to the holders of the Class B Warrants upon exercise of the Class B
Warrants at rate of one Class C Warrant for each Class B Warrant
exercised. The Class A Warrants, the Class B Warrants and the Class C
Warrants are hereinafter referred to as the "Warrants". The Company
desires the Warrant Agent to act on behalf of the Company, and the
Warrant Agent is willing to so act, in connection with the issuance,
registration, transfer, exchange, redemption and exercise of the
Warrants. The Company desires to provide for the form and provisions of
the Warrants, the terms upon which they shall be issued and exercised,
and the respective rights, limitation of rights, and immunities of the
Company, the Warrant Agent, and the holders of the Warrants.
All acts and things have been done and performed which are
necessary to make the Warrants, when executed on behalf of the Company
and countersigned by or on behalf of the Warrant Agent, as provided
herein, the valid, binding and legal obligation of the Company, and to
authorize the execution and delivery of this Agreement."
2. Miscellaneous. Except as otherwise expressly provided herein, the
Agreement is not amended, modified or affected by this Second Amendment. Except
as expressly set forth herein, all of the terms, conditions, covenants,
representations, warranties and all other provisions of the Agreement are herein
ratified and confirmed and shall remain in full force and effect. On and after
the date on which this Second Amendment becomes effective, the terms,
"Agreement," "hereof," "herein," "hereunder" and terms of like import, when used
herein or in the Agreement shall, except where the context otherwise requires,
refer to the Agreement, as amended by this Second Amendment. This Second
Amendment may be executed into one or more counterparts, and it shall not be
necessary that the signatures of all parties hereto be contained on any one
counterpart hereof; each counterpart shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Second Amendment to Agreement has been duly
executed by the parties hereto under their respective corporate seals as of the
day and year first above written.
JVWEB, INC. AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/ Greg J. Micek By: /s/ Herb Lemmer
Greg J. Micek, President
Name: Herbert J. Lemmer
Title: Vice President
CONSULTING SERVICES AGREEMENT
THIS CONSULTING SERVICES AGREEMENT (the "Agreement") is made and entered
into as of the 15th day of February, 1999 by and between JVWeb, Inc., a Delaware
corporation ("JVWeb"), and Tanye Capital Corp. ("Tanye").
RECITALS:
WHEREAS, Tanye is in the business of providing consulting services
regarding corporate development; and
WHEREAS, JVWeb desires to engage Tanye to provide consulting services
regarding corporate development to JVWeb upon the terms, provisions and
conditions set forth hereinafter, and Tanye is willing to provide consulting
services regarding corporate development to JVWeb upon the terms, provisions and
conditions set forth hereinafter;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
AGREEMENTS:
l. Engagement. Subject to the terms, provisions and conditions
hereinafter stated, JVWeb hereby engages Tanye to provide to JVWeb such
consulting services regarding corporate development as JVWeb shall request (the
"Services"), and Tanye hereby accepts such engagement. The objective of this
Agreement is to develop international exposure to JVWeb and to provide
assistance in the long term corporate development of JVWeb. In providing the
Services, Tanye shall use reasonable and its best efforts, shall render the
Services in a competent manner of the highest caliber, and cooperate with JVWeb
and to take all suggestions of JVWeb under serious considerations.
2. Remuneration. In consideration of the Services to be provided
by Tanye to JVWeb hereunder, JVWeb agrees to compensate Tanye as follows:
(a) JVWeb shall issue to Tanye up to 60,000 shares of
JVWeb's common stock ("Common Stock"), in 12 batches
of 5,000 shares each, one issued on the date of this
Agreement and one issued every month thereafter
during the term of this Agreement. JVWeb hereby
acknowledges that it intends to register, with the
U.S. Securities and Exchange Commission (the
"Commission") pursuant to a Registration Statement on
Form SB-2, the shares of Common Stock to be issued
pursuant to this Section 2(a).
(b) JVWeb shall issue to Tanye up to 200,000 shares
of Common Stock in accordance with this Section
2(b). JVWeb shall issue to Tanye a batch of 50,000
shares whenever the closing price of the Common Stock
(averaged over the past 20 trading days) equals or
exceeds $2.00, another batch of 50,000 shares
whenever such closing price so averaged equals or
exceeds $3.50, another batch of 50,000 shares
whenever such closing price so averaged equals or
exceeds $5.00, and a final batch of 50,000 shares
whenever such closing price so averaged equals or
exceeds $6.00.
(c) JVWeb agrees to grant to Tanye, promptly after the
date hereof, by means of documentation similar to
documentation JVWeb has heretofore used, options
("Options") to purchase the following numbers of
shares of Common Stock for the per share exercise
prices indicated to the immediate right of the
numbers of shares:
Numbers of Per Share
Shares Exercise Price
130,000 $ .25
100,000 $ .50
100,000 $ .75
100,000 $1.00
JVWeb hereby acknowledges that it intends to
register, with the Commission pursuant to a
Registration Statement on Form SB-2, the shares of
Common Stock that may be acquired pursuant to the
Options.
In connection with and as an inducement to the issuance of Common Stock
and Options by JVWeb to Tanye as provided herein, Tanye hereby represents and
warrants to JVWeb as follows: it has performed consulting service on behalf of
JVWeb and that as such it is familiar with the business and financial condition,
properties, operations and prospects of JVWeb, it has been given full access to
all material information concerning the condition, properties, operations and
prospects of JVWeb, it has had an opportunity to ask such questions of, and to
receive such information from, JVWeb as it has desired and to obtain any
additional information necessary to verify the accuracy of the information and
data received, and it is satisfied that there is no material information
concerning the condition, properties, operations and prospects of JVWeb, of
which it is unaware; it has such knowledge, skill and experience in business,
financial and investment matters so that it is capable of evaluating the merits
and risks of an acquisition of the Options and an acquisition of the shares of
Common Stock pursuant to this Agreement or pursuant to the Options; it has
reviewed its financial condition and commitments and that, based on such review,
it is satisfied that it (a) has adequate means of providing for contingencies,
(b) has no present or contemplated future need to dispose of all or any portion
of the Options or the shares of the Common Stock acquired or to be acquired
pursuant to this Agreement or pursuant to the Options, to satisfy existing or
contemplated undertakings, needs or indebtedness, (c) is capable of bearing for
the indefinite future the economic risk of the ownership of the Options and the
shares of Common Stock acquired or to be acquired pursuant to this Agreement or
pursuant to the Options, and (d) has assets or sources of income which, taken
together, are more than sufficient so that it could bear the loss of the entire
value of the Options and the shares of Common Stock acquired or to be acquired
pursuant to this Agreement or pursuant to the Options; it is and will be
acquiring the Options and the shares of Common Stock pursuant to this Agreement
or pursuant to the Options solely for its own beneficial account, for investment
purposes, and not with a view to, or for resale in connection with, any
distribution of the Options or the shares of Common Stock; it understands that
the Options and the shares of Common Stock acquired or to be acquired pursuant
to this Agreement or pursuant to the Options have not been and are not likely to
be registered under the Act or any state securities laws and therefore the
Options and the shares of Common Stock acquired or to be acquired pursuant to
this Agreement or pursuant to the Options are and (until registered as provided
herein in the case of certain shares of Common Stock) will be "restricted" under
such laws and may not be resold without registration or an exemption therefrom,
and the Options and all stock certificates representing shares of Common Stock
issued or to be issued to Tanye pursuant hereto or pursuant to the Options will
bear a legend to such effect; and it has not offered or sold and will not offer
or sell any portion of the Options or any shares of Common Stock acquired or to
be acquired pursuant to this Agreement or pursuant to the Options and has no
present intention of reselling or otherwise disposing of any portion of the
Options or any shares of Common Stock acquired or to be acquired pursuant to
this Agreement or pursuant to the Options either currently or after the passage
of a fixed or determinable period of time or upon the occurrence or
non-occurrence of any predetermined event or circumstance.
3. Term. The initial term of this Agreement shall begin on the date
hereof and shall continue for one year thereafter and this Agreement shall be
renewed upon the written agreement of both JVWeb and Tanye for additional one
year renewal terms, unless this Agreement is terminated earlier in accordance
with the provisions of Section 4 below.
4. Termination Upon Certain Events. Notwithstanding anything else
contained herein, JVWeb may immediately terminate this Agreement and be relieved
of any further liability hereunder (except for obligations provided for in
Section 2 above concerning earned but unpaid remuneration) at any time after
notice is given to Tanye after and regarding the following events:
(a) Tanye's failure to provide Services up to the
standards set forth in Section 1 hereof;
(b) Tanye's other breach of this Agreement;
(c) Tanye's dissolution, insolvency, filing of a voluntary
bankruptcy petition, filing against it an involuntary bankruptcy
petition, rendering of a material judgment against it, assignment for
the benefit of creditors, or admission in writing of its inability to
pay its debts as they become due; or
(d) Tanye's violation of any material law in connection
with the provision of the Services.
5. Law Governing. THIS AGREEMENT HAS BEEN ENTERED INTO IN THE STATE OF
TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS.
6. Notices. Any notices, requests, demands, or other communications
herein required or permitted to be given shall be in writing and may be
personally served, sent by United States mail, sent by an overnight courier who
keeps proper records regarding its deliveries, faxed or e-mailed. Notice shall
be deemed to have been given if personally served, when served, or if sent by
overnight courier as aforesaid with charges being billed to the sender, when
received by the party being notified, or if faxed, when the person giving the
notice receives a confirmation statement with all relevant details indicating
that the fax was properly received, or if e-mailed, when the person giving the
notice receives a confirmation statement with all relevant details indicating
that the e-mail was properly received. For purposes of this Agreement, the
physical addresses, fax numbers and e-mail addresses of the parties hereto shall
be the physical addresses, fax numbers and e-mail addresses as set forth on the
signature pages of this Agreement. Any party to be notified hereunder may change
its physical address, fax number or e-mail address by notifying each other party
hereto in writing as to the new physical address, fax number or e-mail address
for sending notices.
7. Headings. The headings of the paragraphs of this Agreement have been
inserted for convenience of reference only and shall in no way restrict or
modify any of the terms or provisions hereof.
8. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part of this Agreement and the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
9. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, whether written or
oral, relating to the subject matter hereof.
10. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of each party hereto and its successors and assigns, but
neither this Agreement nor any rights hereunder may be assigned by any party
hereto without the consent in writing of the other party.
11. Remedies. No remedy conferred by any of the specific provisions of
this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or otherwise. The election of any one or more remedies by any party hereto shall
not constitute a waiver of the right to pursue other available remedies.
12. Independent Contractor. Tanye and JVWeb are independent contracting
parties, and nothing in this Agreement shall make either party the agent or
legal representative of the other for any purpose whatsoever, nor does it grant
either party any authority to assume or to create any obligations on behalf of
or in the name of the other.
IN WITNESS WHEREOF, the undersigned have set their hands hereunto as of
the first date written above.
"JVWEB"
JVWEB, INC.
BY: /s/ Greg J. Micek
Greg J. Micek, President
ADDRESS: 5444 Westheimer, Suite 2080
Houston, Texas 77056
FAX NO: 713/840-9034
E-MAIL ADDRESS: [email protected]
"TANYE"
TANYE CAPITAL CORPORATION
BY: /s/ Keith J. McKenzie
NAME:______________________________
TITLE:_____________________________
ADDRESS: _________________________
-------------------------
FAX NO: ________________________
E-MAIL ADDRESS: ___________________
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of JVWeb, Inc. on Form SB-2
of our report dated September 10, 1998 relating to the financial statement
schedules appearing elsewhere in this Registration Statement.
We also consent to the reference to us under the heading "Experts".
MALONE & BAILEY, PLLC
Houston, Texas
March 12, 1999
